[COMPASS LOGO]
PROFESSIONALLY MANAGED COMBINATION
FIXED/VARIABLE ANNUITIES
FOR PERSONAL INVESTMENTS AND
QUALIFIED RETIREMENT PLANS
SEMIANNUAL REPORT o June 30, 2000
Capital Appreciation Variable Account
Global Governments Variable Account
Government Securities Variable Account
High Yield Variable Account
Managed Sectors Variable Account
Money Market Variable Account
Total Return Variable Account
Issued by
Sun Life Assurance Company of Canada (U.S.),
A Wholly Owned Subsidiary of
Sun Life of Canada (U.S.) Holdings, Inc.
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MFS Original Research[RegTM]
Research has been central to investment management
at MFS since 1932, when we created [MFS ORIGINAL RESEARCH LOGO]
one of the first in-house research
departments in the mutual fund
industry. Original Research(SM) at
MFS is more than just crunching
numbers and creating economic
models: it's getting to know each
security and each company personally.
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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Letter from the President
Dear Contract Owners,
I'm sure you've noticed that whenever financial markets suffer a large decline,
as they did this past spring, there's a flurry of information on "how to deal
with market volatility" -- both in the popular press and from those of us in
the investment business. Our own thinking on this is that, first, for long-term
investors volatility is not necessarily something to be feared; occasional
volatility may in fact be healthy for the markets.
Second, our experience has been that when markets begin to fall, it's often too
late to act. The best response may be to do nothing -- if you're properly
prepared with a long-term plan, created with the help of your investment
professional. To help you create or update that plan and take market volatility
in stride, here are some points you may want to consider the next time you talk
with your investment professional.
1. Volatility can be a good thing
We would argue that the markets today are much healthier than they were before
the period of volatility this past spring, in the sense that stock prices have
returned to more reasonable levels and we have a stronger base for future
growth. Perhaps the worst of the market's wrath descended on companies with
very high stock prices, relative to their earnings, or with business concepts
that looked great in the euphoria of a booming market but in the end appeared
to have no fundamental backing. It has always been our view that one of the
best protections against market volatility is to invest in stocks and bonds of
fundamentally good companies selling at reasonable prices. When discussing
potential investments with your investment professional, you may want to ask
how they fared in previous periods of volatility, as well as in the good times.
2. Invest for the long term
You've heard that before, but we think it's still probably the most important
concept in investing. Time is one of an investor's greatest allies. Over nearly
all long-term periods -- 5, 10, 20 years, and more -- stock and bond returns,
as represented by most common indices, have been positive and have considerably
outpaced inflation. Investing is the best way we know of to make your money
work for you while you're doing something else.
Where investors can get into trouble is by confusing investing with trading. In
our view, traders who buy securities with the intention of selling them at a
profit in a matter of hours, days, or weeks are gambling. We believe this
seldom turns out to be a good strategy for increasing your wealth.
3. Invest regularly
Waiting for the "right time" to invest is almost always a poor strategy,
because only in retrospect do we know when that right time really was. Periods
of volatility are probably the worst times to make an investment decision.
Faced with turmoil in the markets, many investors have opted to simply stay on
the sidelines.
On the other hand, we think one of the best techniques for investing is through
automatic monthly or quarterly deductions from a checking or savings account.
This approach has at least three major benefits. First, you can formulate a
long-term plan -- how much to invest, how often, and into which portfolios --
in a calm, rational manner, working with your investment professional. Second,
with this approach you invest regularly without agonizing over the decision
each time you buy units. And, third, if you invest equal amounts of money at
regular intervals, you'll be taking advantage of a strategy called dollar-cost
averaging: by investing a fixed amount while the unit cost fluctuates, you end
up with an average unit cost to you that is lower than the average unit price
over your investment period.(1) If all this sounds familiar, it's probably
because you're already taking advantage of dollar-cost averaging by investing
regularly for retirement through a 401(k) or similar account at work.
4. Diversify
One of the dangers of not having an investment plan is that you may be tempted
to simply chase performance, by moving money into whatever asset class appears
to be outperforming at the moment -- small, mid, or large cap; growth or value;
United States or international; stocks or bonds. The problem with this approach
is that by the time a particular area is generally recognized as "hot," you may
have already missed some of the best performance.
International investing offers a case in point. In the 1980s, international
investments, as represented by the Morgan Stanley Capital International (MSCI)
Europe, Australia, Far East (EAFE) Index, outperformed U.S. investments, as
represented by the Standard & Poor's 500 Composite Index (S&P 500), in 7 out of
10 years.(2) For the decade, the MSCI EAFE's average annual performance was 23%,
compared to 18% for the S&P 500. Going into the 1990s, then, an investor
looking only at recent performance might have favored international investments
over U.S. investments.
But the 1990s turned out to be virtually a mirror image of the '80s. Domestic
investments outperformed international investments in 7 out of 10 years, with
the S&P 500 returning an average of 18% annually for the decade and the MSCI
EAFE returning a 7% annual average. Looking ahead, however, we are optimistic
about international markets because we feel that many of the same forces that
propelled the current U.S. economic boom -- deregulation, restructuring, and
increased adoption of technology -- have taken root overseas.
The lesson to be learned is that nobody really knows what asset class will be
the next to outperform or how long that performance will be sustained. We would
suggest that one way to potentially profit from swings in the market -- to
potentially be invested in various asset classes before the market shifts in
their favor -- is with a diversified portfolio covering several asset classes.
If you haven't already done so, we encourage you to discuss these thoughts with
your investment professional and factor them into your long-range financial
planning. Hopefully, the next time the markets appear to be going wild, you'll
feel confident enough in your plan to view periods of volatility as a time of
potential opportunity -- or perhaps just a time to sit back and do nothing.
As always, we appreciate your confidence and welcome any questions or comments
you may have.
Respectfully,
/s/ C. James Prieur
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C. James Prieur
President of the Compass Accounts
July 17, 2000
(1) The use of a systematic investing program does not guarantee a profit or
protect against a loss in declining markets. You should consider your
financial ability to continue to invest through periods of low prices.
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Letter from the President -- continued
(2) Source: Lipper Inc. Decade performance: '80s--12/31/79-12/31/89,
'90s--12/31/89-12/31/99. The MSCI EAFE Index is an unmanaged,
market-capitalization-weighted total return index that measures the
performance of the same developed-country global stock markets included in
the MSCI World Index but excludes the United States, Canada, and the South
African mining component. The S&P 500 is a popular, unmanaged index of
common stock total return performance. It is not possible to invest
directly in an index. Past performance is no guarantee of future results.
Investments in variable annuities will fluctuate and may be worth more or less
upon redemption.
Variable annuities are designed for long-term retirement investing; please see
your investment professional for more information.
The opinions expressed in this letter are those of C. James Prieur, and no
forecasts can be guaranteed.
Management Review and Outlook
Capital Appreciation Variable Account
For the six months ended June 30, 2000, the account provided a total return of
6.33%, which compares to a -0.42% return for the account's benchmark, the
Standard & Poor's 500 Composite Index (the S&P 500), a popular, unmanaged index
of common stock total return performance. The account's performance does not
reflect any applicable contract or surrender charges.
During the period, technology continued to be our main focus. However, we
significantly changed the make-up of our technology investments. We reduced our
holdings in some of the mainframe software companies that had populated the
account at the beginning of 2000, such as BMC Software, Microsoft, and
Compuware. We also cut back or eliminated some of our larger technology
positions, including Oracle and Cisco Systems, because we felt their stock
prices had reached or approached full value. Fortunately, a good deal of this
selling came before the market and the technology sector suffered from a
serious correction in March and April. The pre-correction selling significantly
decreased our technology exposure at that time. However, during the correction,
we increased our positions in fiber-optic equipment firms Nortel Networks and
Corning.
Much of our tech focus has been tied to the development of e-commerce, where a
significant amount of corporate spending has been turning. VeriSign, for
example, acts as the custodian for online transactions, taking care of payments
and validations. Nortel Networks and Corning are benefiting from the explosive
expansion of web communications, as more and more fiber capacity is needed to
carry data. We also increased the account's holdings in two semiconductor
manufacturers, Micron Technology and Intel, as we anticipate a fairly
significant upturn in personal computer (PC) sales during the second half of
2000 for two reasons. First, we feel the holiday selling season typically is a
good time of year for PC sales. Second, since we are now well beyond the year
2000 phenomenon and the computer bug fears it spawned, we think corporate
spending on computers will increase. We also anticipate continued growth in the
server market, an area where Intel, in particular, has made significant
inroads. With these trends in place, demand for all types of semiconductors,
high-speed processors, and memory chips should outpace very tight supply to
help these companies' prospects.
We also found opportunities in the utilities and communications sector. It's
important to point out that our largest investments here were dedicated to
companies involved with cellular communications. This segment performed much
better than the sector as a whole, based on the dynamic growth of wireless
voice and data communications. For example, you can now access the Internet
with a cellular phone. Two of our top holdings in this area were service
providers Sprint PCS and Vodafone AirTouch. We also invested in companies like
Metromedia, which are developing local fiber networks in metropolitan areas.
We also added to our energy weighting, particularly in the oil services
segment, including drillers like Transocean Offshore and Global Marine. In our
view, these companies have hit the sweet spot of their business cycle. With oil
prices up, more and more oil companies have sought to increase their drilling
activity. A limited supply of drilling rigs means the price for these
companies' services has been driven higher.
Our financial services holdings were focused on brokerage stocks such as
Merrill Lynch and Morgan Stanley Dean Witter. These companies have done well
due to strong capital markets activity, and may be well positioned if interest
rates start to trend downward. In the retail sector, we have found our best
opportunities in supermarkets and drug stores, including Safeway, Wal-Mart, and
CVS. At the same time, we have been looking to add to our health care
investments in order to take advantage of the steady earnings growth that we
believe pharmaceutical firms offer, and as a way to balance the account's large
technology stake.
All in all, we've tended to concentrate the account more so than in the past.
The market has been very choppy, with some sectors performing very well and
others really struggling. Our research analysts have worked to identify global
trends in industry and business, so we can try to either capitalize on them, or
avoid them altogether.
On the down side, the account's leisure investments lagged somewhat, including
its cable and radio holdings. The feeling in this sector was that -- with the
Olympics and a U.S. presidential election coming up -- conditions for these
companies could not improve over where they are in 2000. Revenue growth for a
lot of these companies hit record levels, and many investors apparently
believed any economic slowdown would spell nothing but bad news. However, we've
remained positive about these companies' long-term prospects. We felt their
struggles were a result of purely emotional market plays rather than any
deterioration in their fundamentals. We believe that their continued strong
fundamentals will help their stock prices rebound in the long run.
Global Governments Variable Account
For the six months ended June 30, 2000, the account provided a total return of
-0.93%, which compares to a return of 0.03% for the account's benchmark, the
Salomon Brothers World Government Bond Index (the Salomon Index), an unmanaged
index consisting of complete universes of government bonds with remaining
maturities of at least five years. The account's performance does not reflect
any applicable contract or surrender charges.
Despite strong economic growth and tightening of monetary policy (raising
interest rates), the U.S. bond market remained one of the strongest and best
performing fixed-income markets year to date. The strength in the market
reflects investor confidence that the U.S. Federal Reserve Board (the Fed) is
effectively guiding the economy to a soft landing -- slowing growth enough to
control inflationary pressure without sending the economy into recession. The
market has also been supported by the reduced supply of government bonds as a
result of the budget surplus and the Treasury buy back program. Almost all the
European markets underperformed the United States as the weaker euro and
growing inflation concerns unnerved potential investors. The market in Japan
also underperformed due to concerns over the potential of their central bank
abandoning the current zero interest-rate policy, since interest rates and bond
prices move in opposite directions.
The account was helped by having overweighted positions in the U.S. bond market
and being underweighted both in Europe
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Management Review and Outlook -- continued
and Japan relative to the Salomon Index. Recently, we started to purchase a
number of sovereign Yankee bonds (dollar-denominated bonds issued in the United
States by foreign governments). The yields on these bonds looked very
attractive. In addition, given their relative safety and favorable outlook for
price appreciation, we have overweighted the account relative to the index in
these securities.
During the past six months, especially during the first quarter, the account's
nominal and relative performance was hurt by the rapid depreciation of the
euro. Longer term, we still believe that the euro will strengthen, partially
due to signs that the European economies are beginning to grow more rapidly
than the United States. This growth may cause the European Central Bank to
raise interest rates further, while the Fed is expected to adopt a more neutral
monetary policy. Consequently, higher interest rates in Europe could attract
more investors and increase cash flows into the beleaguered euro.
If the Fed achieves a soft landing, which we believe is the likely scenario,
U.S. Treasuries should outperform European and Japanese bonds. (The principal
and interest on U.S. Treasury securities are guaranteed by the U.S. government
if held to maturity.) As a result, we'll continue to position the portfolio
defensively while also trying to take advantage of attractively priced
international bonds and improving interest-rate conditions in the United
States. In this environment, we'll begin to moderately increase the account's
duration (sensitivity to interest rates) in U.S. government securities in an
effort to achieve more price appreciation.
Government Securities Variable Account
For the six months ended June 30, 2000, the account provided a total return of
4.08% which compares to a return of 4.38% for the account's benchmark, the
Lehman Brothers Government/Mortgage Index (the Lehman Index), an unmanaged index
of U.S. Treasury, government-agency, and mortgage-backed securities. The
account's performance does not reflect any applicable contract or surrender
charges.
The fixed-income markets were characterized by uncertainty during the first
half of 2000, as investors tried to figure out how much the Federal Reserve
Board (the Fed) would have to hike short-term interest rates in order to slow
growth and head off inflation. U.S. economic growth continued to surpass
expectations through the winter and spring. To dampen this growth, the Fed has
raised the federal funds rate three more times thus far in 2000 -- bringing it
from 5.50% to 6.50% -- after having raised it three times in 1999. More
recently, there have been some signs that growth might be decelerating to a
rate that the Fed may feel is more consistent with a sustainable but
noninflationary pace. Meanwhile, core inflationary pressures increased only
moderately through the period, despite being prodded upward by significant
upswings in the price of oil. Questions surrounding how much oil price
increases would affect other aspects of the economy exacerbated the market's
uncertainty.
The other significant factor that affected fixed-income markets was how the
U.S. government has dealt with its second full fiscal year of budget surplus,
and the implications for the Treasury market. With the U.S. Treasury buying
back more than $200 billion in debt this fiscal year and curtailing its
auctions of new issues, the market has tried to come to terms with a dramatic
decline in the supply of Treasury securities. Since all other sectors of the
fixed-income market are priced relative to Treasuries, this situation has made
it hard for bond investors to evaluate the relative values of fixed-income
securities and has created some illiquidity in the market. The value of 30-year
Treasuries rose sharply as buyers needed to compete with each other in order to
own them.
At the same time, U.S. government agency securities confronted some
difficulties during the first half of 2000. Specifically, some in Washington
called into question the implicit government backing of agencies such as the
Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National
Mortgage Association (Fannie Mae). Concerns revolved around the expansion of
agency activities beyond their original mission, and the potential liability to
taxpayers. As a result of this added scrutiny, agency securities underperformed
Treasuries.
The account has traditionally maintained an overweighted position in agency
securities because these high-quality assets offer a performance advantage over
Treasuries. (Principal value and interest on Treasury securities are guaranteed
by the U.S. government if held to maturity.) During the past six months when
Treasuries proved to be the market leaders, the performance of the account was
impacted by its focus on agency securities. The account began the year with a
neutral weighting in mortgage-backed securities, a position that helped its
performance because their performance lagged Treasuries somewhat. However, as
the period progressed we added to both the agency and mortgage-backed security
positions because we believe opportunities there offered tremendous long-term
value.
As far as maturity was concerned, we positioned the Treasury portion of the
account to take advantage of increases in short-term rates and decreases in
long-term rates. Specifically, we used a "barbell" strategy, investing the
account in long-term Treasuries on the one hand and very short-term cash
equivalents on the other, with very little in between. By doing so, the account
was able to benefit on the short end as the Fed raised rates, realize the
capital appreciation offered by long-term Treasuries as their yields fell and
prices rose, and avoid the intermediate-term securities that underperformed.
However, with more confidence that we are nearing the end of this current Fed
tightening cycle, it's likely that we'll move away from the barbell structure,
aiming instead to target specific maturities that we feel offer particular
opportunity.
We also kept the account's duration -- a measure of its sensitivity to changes
in interest rates -- somewhat long, or more sensitive, because of our positive
outlook regarding inflation and the Treasury market.
Looking ahead, we, along with the rest of the market, will try to gauge the
effects of the Fed's monetary policy. Generally, it takes 9 to 18 months to
measure the impact on the economy of Fed rate moves. It could very well be that
the inflationary impact of rising oil prices is behind us, and that inflation
has been well contained by the Fed's policy actions. Overall, we feel it should
be a good environment for fixed-income investing. If the Fed hasn't already
reached the end of its rate-hike program, we think it appears to be close. If
so, we think we should witness growth settling back into a range of around 3.0%
to 3.5%, which the Fed feels is not inflationary. The government continues to
run up sizable surpluses and pay down debt. The market seems to have nearly
universal confidence in the Fed's ability to keep inflation from getting out of
hand. In sum, the environment should prove to be very favorable for Treasuries.
This steadier backdrop should also bode well for those sectors that are
represented in the account, such as agencies and mortgage-backed securities.
High Yield Variable Account
For the six months ended June 30, 2000, the account provided a total return of
0.50%, which compares to a return of -1.21% for the account's benchmark, the
Lehman Brothers High Yield Bond Index, an unmanaged index of noninvestment-grade
corporate debt. The account's performance does not reflect any applicable
contract or surrender charges.
The high-yield market remained plagued by a number of difficulties during most
of the period. First, high-yield portfolios
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Management Review and Outlook -- continued
experienced approximately $6.5 billion in outflows this year, which hurt demand
for high-yield securities. Second, while default rates have recently come down
a bit, they remained relatively high during the period. Finally, concerns about
inflation and unsustainable economic growth kept investors nervous about future
interest-rate hikes. While we are starting to see signs that the economy is
slowing and the Federal Reserve Board (the Fed) may be nearing the end of its
rate hikes, we think the possibility of one or two more increases is not out of
the question. On a more positive note, we've recently started to see money
flowing back into the high-yield market as the interest-rate environment has
improved and investors are being drawn to some extremely attractive yields
relative to U.S. Treasury and investment-grade bonds. (Principal value and
interest on Treasury securities are guaranteed by the U.S. government if held
to maturity.)
In a market where most high-yield bonds traded lower, the portfolio's
performance compared to its benchmark benefited from favorable security
selection and industry diversification. During the second quarter of 2000, many
telecommunications and media securities experienced a dramatic sell-off along
with the equity market. However, our holdings in these sectors, as well as
holdings in industries such as gaming and industrial manufacturing, held up
well during the period. We maintained our positions in telecommunications
bonds, which remained the largest industry exposure in the portfolio. Companies
such as Nextel, and Esat Holdings Ltd., are among the account's larger holdings
and provided a positive contribution to performance. Our position in Nextel
Communications provided steady gains due to persistent strength in wireless
subscriber growth. Our holding in Esat Holdings Ltd., another
telecommunications company, provided a nice boost to performance after it was
bought out by British Telecom. We also weren't afraid to take some profits in
energy-company bonds, as oil and natural gas prices reached historically high
levels.
In addition to favorable security selection, our successful avoidance of the
credit problems and bankruptcies that hurt a variety of industries helped the
account's performance. The key to avoiding credit defaults is in-depth
research, and we believe MFS' research capabilities are second to none in the
industry. The High Yield Variable Account is backed by a large group of
investment professionals dedicated exclusively to the high-income market. Our
research analysts use a variety of models to analyze the credit risk and
business prospects of the companies they cover. We carefully measure and manage
the underlying financial stability of each company we hold in the portfolio.
Similar to our equity research, it's an intensive, company-by-company,
bottom-up approach. First, we look at a company's business risks, then we
consider the financial risks. Finally, we look at all the different ways of
investing in the company and how the market is pricing each one of the
securities. From this analysis, we try to pick the bond that offers the best
risk-adjusted return. Our holding in U.S. Can Corp., one of the world's largest
aerosol can manufacturers, is a good example of a bond that met our stringent
investment criteria and benefited the account's performance. The company's
management instituted a number of cost-saving efficiencies in their plants,
which improved profitability and cash flow. The company then began to buy back
their bonds resulting in substantial price appreciation.
After telecommunications, our second largest exposure was in media. Core
holdings included cable television and radio entities such as Charter
Communications, one of the fastest-growing companies in the field. Controlled
by Paul Allen, the co-founder of Microsoft, Charter's valuation has risen
following the increased utilization of cable networks as a means of accessing
the Internet.
In many ways, we view telecom and media as defensive industries that offer
attractive growth and income opportunities. Most people are not going to turn
off their cable or mobile phones if the economy slows down. On the other hand,
some of the big-ticket capital items such as industrial machinery, building
materials, and autos may experience a slow down in business and consumer
spending due to higher interest rates. Given the current economic environment,
we like the telecom and media sectors, and we've maintained our exposure to
these industries since the beginning of the year. We've taken some money off
the table in some of the more cyclical industries such as steel and paper
packaging, as well as in general manufacturing. We increased holdings in gaming
bonds, which we also view as a somewhat defensive industry. These securities
have gained ground because there are fewer and fewer regions of the country
that permit gaming, and we believe these companies will continue to produce
exceptional earnings and cash flow growth.
Looking ahead, we're cautiously optimistic regarding a recovery in high-yield
securities. While it's difficult to rule out further volatility given the
uncertain interest-rate environment, the high-income market has been weak for
quite some time now. Yield spreads, the yield difference between
noninvestment-grade debt and Treasuries, have widened significantly during the
past year, making the yields on high-income bonds very attractive relative to
other fixed-income securities in our view. In addition, we believe the economy
will remain healthy and corporate earnings will remain strong. And, ultimately,
the high-yield market usually tracks corporate earnings.
Managed Sectors Variable Account
For the six months ended June 30, 2000, the account provided a total return of
-7.22%, which compares to returns of -0.42% and -1.54%, respectively, for the
account's benchmarks, the S&P 500 and the Lipper Capital Appreciation Portfolio
Index (the Lipper Index). The Lipper Index is an unmanaged, net asset
value-weighted measure of the largest qualifying portfolios with capital
appreciation as their investment objective. The account's performance does not
reflect any applicable contract or surrender charges.
A global correction in the high-growth segments of the market in which we
invest hampered our short-term performance earlier this year. Fueled by
investor concerns over further Federal Reserve Board (the Fed) interest rate
increases, the correction in the valuations of technology, media,
telecommunications, and biotechnology stocks began in the second week of March
and continued through the first two months of the second quarter.
Recently, we have seen some signs that the Fed's six interest rate increases
since last summer may have begun to slow the economy. Some key economic
indicators in early June, including a modest rise in unemployment, a slowing in
housing starts, and lower-than-expected wage gains, gave us hope that there
will be fewer or no increases going forward. We have also seen more attractive
valuations in the high-growth areas of the market and we believe we may have
seen the lows in the NASDAQ Composite Index (an unmanaged, market-weighted
index of all over-the-counter common stocks traded on the National Association
of Securities Dealers Automated Quotation system), following the correction
earlier this year. While we could certainly see further market volatility as
investors adjust to the latest news on the economy and interest rates, we
believe we may be entering a more favorable investment environment.
During the six-month period, we upgraded the portfolio by adding to our
positions in those companies that we believe will become the true long-term
leaders in their industries and are capable of generating the strongest
relative earnings growth. At the same time, in light of the rising
interest-rate environment we
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Management Review and Outlook -- continued
had earlier this year, we reduced our positions in some of our more highly
valued stocks that we felt had limited upside earnings potential, and added
selectively to more defensive holdings such as generic drug and pharmaceutical
companies, as well as food and drug retailers.
Our best investment ideas have continued to be in technology,
telecommunications, and health care. We believe that these high-growth segments
of the market could continue to deliver superior earnings growth, particularly
in a low or stabilizing interest-rate environment.
Technology continues to be our core sector because we believe these companies
offer the most attractive growth characteristics that we can identify across a
range of industries. Although we have shifted our technology weightings from
time to time, we are well positioned to take advantage of what we expect to be
much narrower leadership than we've seen in the past. We think that certain
core, high-quality technology companies will become dominant in their
respective markets. Among them, those leaders first to market with new products
and services are the companies we want to own.
Many of our technology holdings are companies that enable e-commerce, both
business to business and business to consumer. We believe the most successful
among them will be the companies with the scale to meet the demands of
corporations eagerly buying the latest business technologies in order to stay
competitive. Our technology holdings also include select Internet
infrastructure and software companies such as VeriSign and Check Point, in
addition to semiconductor companies such as Micron Technology and Intel.
In utilities and telecommunications, we owned a lot of emerging telecom service
providers last year. We reduced our holdings this year due to changes taking
place in the industry -- most notably, the cost of doing business, particularly
in terms of licensing, and capital spending, is expected to go higher and make
these companies less profitable. Currently, our largest utilities and
telecommunications holdings are in telecom equipment companies such as Nortel
Networks, Corning, CIENA, and ADC Telecom.
With respect to health care, we have targeted quality names like Sepracor, an
emerging pharmaceutical company, and companies that make equipment used in
genetics research, such as PE Biosystems. Among the thousands of health care
companies available, we're focusing on the biotechnology and emerging
pharmaceutical companies that we feel have the best intellectual property and
product pipelines, both of which should help them to better meet shareholder
expectations.
Based on the positive outlook for oil and gas prices, we have added to our
holdings in the energy services area. We will, however, watch the supply and
demand of oil, because the price of this commodity drives the prices of these
energy stocks. Finally, we're somewhat cautious on retail because rising
interest rates tend to dampen consumer confidence and slow the pace of consumer
spending.
We are in a volatile period where we need to see how much further interest
rates must rise in order to cool off the economy. Although we expect to see
some interim volatility, for the long term, we are optimistic on growth stocks,
especially in technology, telecommunications, and health care. Within these
sectors, we are working to build positions in companies that can become leaders
in their industries and deliver growth over long periods of time, thus creating
value for shareholders.
Money Market Variable Account
Despite some signs of moderating economic growth in the second quarter of 2000,
the U.S. economy continued to grow steadily and unemployment fell to 30-year
lows. Historically, these conditions have caused inflation to accelerate, and
the Federal Reserve Board (the Fed) moved to contain the inflationary pressures
that usually accompany this backdrop.
While the Fed refrained from raising interest rates during its last meeting, we
don't believe the possibility of future interest-rate hikes can be ruled out.
As a result, we've structured the portfolio with a relatively short maturity
and targeted 36 days for the average maturity of the account's holdings.
We continue to limit the account's investments to securities issued or
guaranteed by the U.S. Treasury, agencies, or instrumentalities of the U.S.
government, as well as to the highest-quality corporate and bank issues, in
order to provide maximum security against credit risk. On June 30, 2000,
approximately 80% of the portfolio was invested in high-quality commercial
paper, with the balance invested in U.S. government or government-guaranteed
issues.
Investments in the account are not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the account
seeks to preserve the value at $1.00 per unit, it is possible to lose money by
investing in the account.
Total Return Variable Account
For the six months ended June 30, 2000, the account provided a total return of
2.72%, which compares to returns of -0.42% and 4.18%, respectively, for the
account's benchmarks, the S&P 500 and the Lehman Brothers Government/Corporate
Bond Index, an unmanaged market-value-weighted index of all debt obligations of
the U.S. Treasury and U.S. government agencies (excluding mortgage-backed
securities) and investment-grade U.S. corporate debt. The account's performance
does not reflect any applicable contract or surrender charges.
In our view, what makes this portfolio different from other balanced portfolios
is the fact that we remain committed to our disciplined approach to asset
allocation, unlike managers of many balanced portfolios, who often take on
additional risks by increasing their exposure to aggressive growth stocks. We
maintain a roughly 60% equity, 40% fixed-income and cash investment mix because
we believe this is what investors expect from a balanced portfolio. We believe
this strategy provides the right balance of growth and income potential.
Due to a steady rise in interest rates during the past year, it has been a
difficult environment for bonds. However, the portfolio's bond holdings posted
positive returns during the past six months and generally added stability to
the portfolio in a period marked by highly volatile equity markets. At the same
time, our equity stake was bolstered by our focus on value stocks and strong
security selection in energy and insurance stocks, which contributed positively
to the portfolio's total return.
Among energy stocks, oil services as well as exploration and production
companies provided an impressive boost to performance. These stocks are
typically very sensitive to oil and natural gas price changes and benefited
immensely from rising prices. We've anticipated this favorable business
environment for some time now, and it has worked very well in recent months. In
the insurance sector, a few of the portfolio's holdings produced exceptional
performance. Recently, the Dutch financial services company ING Groep agreed to
buy ReliaStar Financial Corp., which caused our position in ReliaStar to nearly
double. This news sparked a rally in the insurance industry, as investors began
to recognize the strong fundamental business outlooks and the potential for
further consolidation among insurance companies.
We also took advantage of some weakness in pharmaceutical stock prices in the
early part of the year to increase our positions in high-quality companies with
strong long-term track records.
5
<PAGE>
Management Review and Outlook -- continued
Stocks such as Pharmacia and Abbott Laboratories came back strong in the second
quarter, and we think they still offer attractive growth opportunities at
compelling valuations.
While value stocks have rallied recently, it's difficult to predict whether
this trend will continue. But our feeling is that there is plenty of upside for
more reasonably priced stocks with good fundamental growth prospects,
especially if interest rates and the economic backdrop remain uncertain. We
think more defensive stocks in noncyclical sectors of the economy, such as
consumer nondurables and health care stocks, have the potential to outperform
aggressive growth stocks in this environment.
With regard to our bond holdings during this period, as corporate bonds and
mortgage-backed securities recovered in the first quarter of 2000, we decided
to secure some profits and decrease our positions in these sectors. At the same
time, we shifted some assets into U.S. Treasuries as the outlook for government
securities appeared to brighten. We felt this strategy worked well, especially
following the government's announced plans to buy back nearly $30 billion of
longer-maturity Treasuries during the year. (Principal value and interest on
Treasury securities are guaranteed by the U.S. government if held to maturity.)
With corporate bonds, we also found ourselves in the right areas of the market.
Our positioning in various telecommunications and media issues proved
particularly beneficial.
Looking forward, while certain pockets of the market remain overvalued in our
view, we are still finding some quality companies at what we think are
attractive prices. In addition, we feel there is potential for strong corporate
earnings across a wide range of industries. However, we intend to proceed with
some caution given the Fed's determination to slow down the economy. In light
of the current economic uncertainty, the market is beginning to behave as we
would expect -- defensive, value-oriented stocks have been rebounding, while
growth stocks have suffered. Whether this current trend will persist is
difficult to determine. As a result, we believe it makes sense for investors to
maintain a well-diversified portfolio.
-----------------------------------
The opinions expressed in this report are those of the portfolio managers and
are current only through the end of the period of the report as stated on the
cover. The managers' views are subject to change at any time based on market
and other conditions, and no forecasts can be guaranteed.
The portfolios are actively managed, and current holdings may be different.
It is not possible to invest directly in an index.
Investment Objectives and Policies
Capital Appreciation Variable Account (CAVA) seeks to maximize capital
appreciation by investing in securities of all types, with a major emphasis on
common stocks.
Global Governments Variable Account (GGVA) seeks moderate current income and
preservation and growth of capital by investing in a portfolio of U.S. and
foreign government and government-related securities. Investments in foreign
and emerging market securities may provide superior returns but also involve
greater risk than U.S. investments. Investments in foreign and emerging market
securities may be favorably or unfavorably affected by changes in interest
rates and currency exchange rates, market conditions, and the economic and
political conditions of the countries where investments are made. These risks
may increase unit price volatility. Government guarantees apply to individual
securities only and not to price and yields of units in a managed portfolio.
See the prospectus for details.
Government Securities Variable Account (GSVA) seeks current income and
preservation of capital by investing in U.S. government and government-related
securities. Government guarantees apply to individual securities only and not
to prices and yields of units in a managed portfolio. See the prospectus for
details.
High Yield Variable Account (HYVA) seeks current income and capital
appreciation by investing primarily in fixed-income securities of U.S. and
foreign issuers that may be in the lower-rated categories or unrated and may
include equity features. Lower-rated securities may provide greater returns,
but they are also associated with greater-than-average risk. These risks may
increase unit price volatility. See the prospectus for details.
Managed Sectors Variable Account (MSVA) seeks capital appreciation by varying
the weighting of its portfolio of common stocks among 13 industry sectors. The
account may focus its investments in certain sectors, thereby increasing its
vulnerability to any single economic, political, or regulatory development. See
the prospectus for details.
Money Market Variable Account (MMVA) seeks maximum current income to the extent
consistent with stability of principal by investing exclusively in money market
instruments maturing in less than 13 months. Investments in the account are not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the account seeks to preserve the value of your
investment at $1.00 per unit, it is possible to lose money by investing in the
account. See the prospectus for details.
Total Return Variable Account (TRVA) seeks primarily to obtain above-average
income (compared to a portfolio entirely invested in equity securities)
consistent with prudent employment of capital; its secondary objective is to
take advantage of opportunities for growth of capital and income. Assets will
be allocated and reallocated from time to time between money market,
fixed-income, and equity securities. Under normal market conditions, at least
25% of the account's assets will be invested in fixed-income securities, and at
least 40% and no more than 75% of its assets will be invested in equity
securities.
Six-month performance through June 30, 2000
<TABLE>
<CAPTION>
Compass 2 (U.S.) Compass 3 (U.S)
----------------------------------------------------------------------------
<S> <C> <C>
Capital Appreciation Variable Account 5.65% 5.59%
Global Governments Variable Account (1.55)% (1.63)%
Government Securities Variable Account 3.40% 3.34%
High Yield Variable Account (0.14)% (0.19)%
Managed Sectors Variable Account (7.80)% (7.87)%
Money Market Variable Account 2.09% 2.04%
Total Return Variable Account 2.08% 2.00%
</TABLE>
These performance results reflect any applicable contract or surrender charges.
Past performance is no guarantee of future results. More recent returns may be
more or less than those shown above.
6
<PAGE>
Portfolio of Investments (Unaudited) -- June 30, 2000
Capital Appreciation Variable Account
Stocks -- 98.1%
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. Stocks -- 85.0%
Aerospace -- 1.3%
Boeing Co. ...................................... 262,400 $ 10,971,600
------------
Automotive -- 0.6%
Harley-Davidson, Inc. ........................... 139,200 $ 5,359,200
------------
Banks and Credit Companies -- 0.2%
Wells Fargo Co. ................................. 54,300 $ 2,104,125
------------
Biotechnology -- 1.4%
Pharmacia Corp. ................................. 127,804 $ 6,605,869
Waters Corp.* ................................... 39,900 4,980,019
------------
$ 11,585,888
------------
Business Machines -- 0.7%
Seagate Technology, Inc.* ....................... 36,800 $ 2,024,000
Sun Microsystems, Inc.* ......................... 42,800 3,892,125
------------
$ 5,916,125
------------
Business Services -- 1.5%
Bea Systems, Inc.* .............................. 45,000 $ 2,224,688
Computer Sciences Corp.* ........................ 98,000 7,319,375
Nextel Partners, Inc. ........................... 37,840 1,232,165
Thermo Electron Corp.* .......................... 108,200 2,278,962
------------
$ 13,055,190
------------
Cellular Telephones -- 1.8%
Sprint Corp. (PCS Group)* ....................... 256,600 $ 15,267,700
------------
Computer Software -- Personal Computers -- 2.1%
Mercury Interactive Corp.* ...................... 22,400 $ 2,167,200
Microsoft Corp.* ................................ 198,900 15,912,000
------------
$ 18,079,200
------------
Computer Software -- Services -- 1.6%
EMC Corp.* ...................................... 136,000 $ 10,463,500
Informatica Corp.* .............................. 1,600 131,100
TIBCO Software, Inc.* ........................... 28,700 3,077,627
------------
$ 13,672,227
------------
Computer Software -- Systems -- 8.3%
Agile Software Corp.* ........................... 4,000 $ 282,750
Ariba, Inc.* .................................... 16,800 1,647,188
BMC Software, Inc.* ............................. 134,900 4,921,742
Cadence Design Systems, Inc.* ................... 259,800 5,293,425
Compuware Corp.* ................................ 209,100 2,169,412
Comverse Technology, Inc.* ...................... 47,800 4,445,400
Digex, Inc.* .................................... 44,900 3,050,394
E.piphany, Inc.* ................................ 26,400 2,829,750
Foundry Networks, Inc.* ......................... 1,750 192,500
I2 Technologies, Inc.* .......................... 18,100 1,887,208
MMC Networks, Inc.* ............................. 15,200 812,250
Oracle Corp.* ................................... 335,624 28,213,392
Rational Software Corp.* ........................ 31,700 2,946,119
Siebel Systems, Inc.* ........................... 16,200 2,649,712
StorageNetworks, Inc.* .......................... 1,070 96,568
VERITAS Software Corp.* ......................... 73,850 8,346,204
Vitria Technology, Inc.* ........................ 24,900 1,522,013
------------
$ 71,306,027
------------
Conglomerates -- 1.5%
Tyco International Ltd. ......................... 265,200 $ 12,563,850
------------
Consumer Goods and Services -- 0.6%
Colgate-Palmolive Co. ........................... 92,500 $ 5,538,437
------------
Drugs & Health Care -- 0.1%
Celera Genomics Co.* ............................ 12,200 $ 1,140,700
------------
Electrical Equipment
Capstone Turbine Corp.* ......................... 460 $ 20,729
------------
Electronics -- 14.9%
Altera Corp.* ................................... 53,600 $ 5,463,850
Analog Devices, Inc.* ........................... 125,800 9,560,800
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Electronics -- continued
DuPont Photomasks, Inc.* ........................ 27,900 $ 1,911,150
Fairchild Semiconductor
International Co.* ............................ 29,500 1,194,750
Flextronics International Ltd.* ................. 122,400 8,407,350
Helix Technology Corp.* ......................... 35,700 1,392,300
Intel Corp. ..................................... 135,500 18,114,656
KLA-Tencor Corp.* ............................... 29,700 1,739,306
Lam Research Corp.* ............................. 102,100 3,828,750
LSI Logic Corp.* ................................ 75,100 4,064,788
Micron Technology, Inc.* ........................ 434,700 38,280,769
Novellus Systems, Inc.* ......................... 110,000 6,221,875
Photronics, Inc.* ............................... 50,200 1,424,425
Sanmina Corp.* .................................. 45,500 3,890,250
SCI Systems, Inc.* .............................. 10,300 403,631
Solectron Corp.* ................................ 56,600 2,370,125
Tektronix, Inc. ................................. 88,700 6,563,800
Teradyne, Inc.* ................................. 42,700 3,138,450
Varian Semiconductor Equipment
Associates, Inc.* ............................. 83,000 5,213,437
Veeco Instruments, Inc.* ........................ 71,000 5,200,750
------------
$128,385,212
------------
Entertainment -- 4.5%
Clear Channel Communications, Inc.* ............. 160,576 $ 12,043,200
Infinity Broadcasting Corp., "A"* ............... 355,500 12,953,531
Time Warner, Inc. ............................... 94,400 7,174,400
Viacom, Inc., "B"* .............................. 92,333 6,295,957
------------
$ 38,467,088
------------
Financial Institutions -- 3.9%
Associates First Capital Corp., "A" ............. 94,900 $ 2,117,456
Citigroup, Inc. ................................. 151,400 9,121,850
Donaldson, Lufkin & Jenrette, Inc. .............. 47,700 2,024,269
Federal National Mortgage Assn. ................. 64,600 3,371,313
Financial Federal Corp. * ....................... 111,550 1,938,181
Goldman Sachs Group, Inc. ....................... 23,800 2,258,025
Merrill Lynch & Co., Inc. ....................... 53,100 6,106,500
Morgan Stanley Dean Witter & Co. ................ 81,000 6,743,250
------------
$ 33,680,844
------------
Insurance -- 2.8%
American International Group, Inc. .............. 48,000 $ 5,640,000
Gallagher (Arthur J.) & Co. ..................... 93,700 3,935,400
Hartford Financial Services Group, Inc. ......... 150,200 8,401,813
Marsh & McLennan Cos., Inc. ..................... 56,700 5,921,606
------------
$ 23,898,819
------------
Internet -- 3.1%
Allaire Corp.* .................................. 14,200 $ 521,850
Interwoven, Inc.* ............................... 5,400 593,916
Selectica, Inc.* ................................ 12,010 841,450
VeriSign, Inc.* ................................. 139,280 24,582,920
------------
$ 26,540,136
------------
Machinery -- 0.6%
Deere & Co., Inc. ............................... 130,500 $ 4,828,500
------------
Medical and Health Products -- 2.6%
American Home Products Corp. .................... 99,500 $ 5,845,625
Bristol-Myers Squibb Co. ........................ 135,500 7,892,875
Pfizer, Inc. .................................... 170,225 8,170,800
------------
$ 21,909,300
------------
Medical and Health Technology
and Services -- 0.9%
Health Management Associates,
Inc., "A"* .................................... 311,400 $ 4,067,662
PE Corp.-PE Biosystems Group .................... 61,400 4,044,725
------------
$ 8,112,387
------------
</TABLE>
7-CAVA
<PAGE>
Portfolio of Investments (Unaudited) -- continued
Stocks -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Oil Services -- 3.5%
Baker Hughes, Inc. ........................ 185,300 $ 5,929,600
Cooper Cameron Corp.* ..................... 52,500 3,465,000
Global Marine, Inc.* ...................... 299,400 8,439,337
Halliburton Co. ........................... 137,500 6,488,281
Noble Drilling Corp.* ..................... 95,800 3,945,763
Weatherford International, Inc.* .......... 47,500 1,891,094
------------
$ 30,159,075
------------
Oils -- 2.3%
Conoco, Inc., "A" ......................... 226,900 $ 4,991,800
EOG Resources, Inc. ....................... 63,800 2,137,300
Santa Fe International Corp. .............. 87,600 3,060,525
Transocean Sedco Forex, Inc. .............. 173,300 9,260,719
------------
$ 19,450,344
------------
Pharmaceuticals -- 0.1%
Sepracor, Inc.* ........................... 10,100 $ 1,218,312
------------
Restaurants and Lodging -- 0.3%
Cendant Corp.* ............................ 180,926 $ 2,532,964
------------
Retail -- 4.2%
Best Buy Co., Inc.* ....................... 31,600 $ 1,998,700
CVS Corp. ................................. 302,200 12,088,000
Home Depot, Inc. .......................... 36,700 1,832,706
Office Depot, Inc.* ....................... 190,150 1,188,438
RadioShack Corp. .......................... 157,100 7,442,613
Wal-Mart Stores, Inc. ..................... 206,100 11,876,512
------------
$ 36,426,969
------------
Supermarkets -- 1.3%
Safeway, Inc.* ............................ 251,000 $ 11,326,375
------------
Telecommunications -- 15.4%
Allegiance Telecom, Inc.* ................. 57,100 $ 3,654,400
Amdocs Ltd.* .............................. 31,400 2,409,950
American Tower Corp., "A"* ................ 89,400 3,726,862
AT&T Corp., "A"* .......................... 292,000 7,081,000
Cabletron Systems, Inc.* .................. 227,100 5,734,275
Cisco Systems, Inc.* ...................... 438,500 27,872,156
Copper Mountain Networks, Inc.* ........... 16,100 1,418,813
Corning, Inc. ............................. 98,000 26,447,750
Cox Communications, Inc.* ................. 164,600 7,499,587
EchoStar Communications Corp.* ............ 30,600 1,013,147
Emulex Corp.* ............................. 20,800 1,366,300
Exfo Electro -- Optical Engineering, Inc.* 3,370 147,859
Metromedia Fiber Network, Inc., "A"* ...... 280,260 11,122,819
MGC Communications, Inc.* ................. 36,600 2,193,712
NEXTEL Communications, Inc.* .............. 103,800 6,351,262
Nextlink Communications, Inc., "A"* ....... 89,200 3,384,025
NTL, Inc.* ................................ 62,250 3,727,219
Qwest Communications
International, Inc.* .................... 51,498 2,558,807
Spectrasite Holdings, Inc.* ............... 68,100 1,932,338
Stratos Lightwave, Inc.* .................. 450 12,544
Time Warner Telecom, Inc.* ................ 77,700 5,001,937
UnitedGlobalCom, Inc.* .................... 83,200 3,889,600
Williams Communications Group, Inc.* ...... 66,100 2,193,694
Winstar Communications, Inc.* ............. 60,500 2,049,438
------------
$132,789,494
------------
Telecommunications and Cable -- 1.3%
Comcast Corp., "A"* ....................... 275,400 $ 11,153,700
------------
Utilities -- Electric -- 1.6%
AES Corp.* ................................ 301,800 $ 13,769,625
------------
Total U.S. Stocks ..................................... $731,230,142
------------
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Foreign Stocks -- 13.1%
Bermuda -- 1.3%
FLAG Telecom Holdings Ltd.
(Telecommunications)* ................... 167,800 $ 2,496,025
Global Crossing Ltd.
(Telecommunications)* ................... 334,400 8,798,900
------------
$ 11,294,925
------------
Canada -- 2.8%
Nortel Networks Corp.
(Telecommunications) .................... 357,604 $ 24,406,473
------------
Finland -- 0.4%
Sonera Oyj (Telecommunications) ........... 84,300 $ 3,842,576
------------
France -- 0.1%
Business Objects S.A., ADR
(Computer Software -- Systems)* ......... 10,400 $ 916,500
------------
Hong Kong -- 0.3%
China Telecom Ltd.
(Telecommunications) .................... 312,000 $ 2,751,764
------------
Israel -- 0.6%
Check Point Software Technologies Ltd.
(Computer Software -- Services)* ........ 21,100 $ 4,467,925
Partner Communications Co. Ltd., ADR
(Cellular Telephones)* .................. 52,225 496,138
------------
$ 4,964,063
------------
Japan -- 1.0%
Daiwa Securities Group, Inc.
(Banks and Credit Cos.) ................. 392,000 $ 5,173,454
NTT Mobile Communications Network,
Inc. (Telecommunications) ............... 122 3,300,716
------------
$ 8,474,170
------------
Mexico -- 0.6%
Grupo Iusacell S. A. de C. V., ADR
(Telecommunications)* ................... 175,100 $ 2,735,937
Telefonos de Mexico S.A., ADR
(Utilities -- Telephone) ................ 38,460 2,197,028
------------
$ 4,932,965
------------
Netherlands -- 1.0%
ASM Lithography Holding N.V.
(Computer Software -- Systems)* ......... 52,400 $ 2,312,150
KPN N.V. (Telecommunications)* ............ 1,680 75,135
Libertel N.V. (Cellular
Telecommunications)* .................... 110,100 1,676,368
Versatel Telecommunications N.V.
(Telecommunications)* ................... 97,895 4,111,826
------------
$ 8,175,479
------------
Norway -- 0.2%
Schibsted ASA (Publishing) ................ 100,090 $ 1,855,247
------------
Singapore -- 0.7%
Chartered Semiconductor Manufacturing
Co., ADR (Electronics)* ................. 66,700 $ 6,003,000
------------
South Korea -- 1.1%
Samsung Electronics Co. (Electronics) ..... 48,700 $ 9,520,850
------------
Sweden -- 0.4%
Ericsson LM, ADR (Telecommunications)...... 167,800 $ 3,356,000
------------
United Kingdom -- 2.6%
BP Amoco PLC, ADR (Oils) .................. 172,400 $ 9,751,375
Vodafone AirTouch PLC
(Telecommunications)* ................... 3,034,033 12,253,379
------------
$ 22,004,754
------------
Total Foreign Stocks ............................... $112,498,766
------------
Total Stocks (Identified Cost, $684,850,268) ....... $843,728,908
------------
</TABLE>
8-CAVA
<PAGE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Short-Term Obligation -- 0.9%
Associates First Capital Corp., due
7/03/00, at Amortized Cost ......... $8,021 $ 8,017,925
------------
Total Investments (Identified Cost, $692,868,193)... $851,746,833
Other Assets, Less Liabilities -- 1.0% ............... 8,347,526
------------
Net Assets -- 100.0% ................................ $860,094,359
============
</TABLE>
See portfolio footnotes and notes to financial statements.
Portfolio of Investments (Unaudited) -- June 30, 2000
Global Governments Variable Account
Bonds -- 74.7%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Foreign Bonds -- 45.2%
Australia -- 0.6%
Commonwealth of Australia, 6.75s, 2006 AUD 125 $ 77,247
------------
Canada -- 3.0%
Government of Canada, 5.25s, 2008 ............ CAD 144 $ 128,054
Government of Canada, 5.5s, 2009 ............. 382 252,373
------------
$ 380,427
------------
Denmark -- 1.6%
Kingdom of Denmark, 7s, 2007 ................. DKK 1,421 $ 195,170
------------
France -- 2.3%
Republic of France, 4s, 2009 ................. EUR 332 $ 286,032
------------
Germany -- 16.1%
Republic of Germany, 6.75s, 2004 ............. EUR 834 $ 841,379
Republic of Germany, 4.5s, 2009 .............. 546 495,046
Republic of Germany, 4.75s, 2008 ............. 306 283,099
Republic of Germany, 8s, 2002 ................ 412 415,300
------------
$ 2,034,824
------------
Greece -- 1.8%
Hellenic Republic, 8.7s, 2005 ................ GRD 39,000 $ 122,113
Hellenic Republic, 8.9s, 2003 ................ 8,900 26,938
Republic of Greece, 8.6s, 2008 ............... 24,000 78,104
------------
$ 227,155
------------
Italy -- 7.7%
Republic of Italy, 5s, 2008 .................. EUR 1,046 $ 966,583
------------
Japan -- 2.8%
Development Bank of Japan,
1.75s, 2010 (Bank) ......................... JPY 10,000 $ 93,882
Japan Bank for International
Cooperation, 7.125s, 2005 (Bank) ........... DEM 255 255,038
------------
$ 348,920
------------
Mexico -- 0.5%
United Mexican States, 9.875s, 2010 .......... $ 58 $ 60,610
------------
Supra-national -- 1.7%
International Bank Reconstruction &
Development, 2s, 2008 (Bank) ............... JPY 22,400 $ 219,389
Sweden -- 1.4%
Kingdom of Sweden, 6s, 2005 .................. SEK 400 $ 46,624
Kingdom of Sweden, 9s, 2009 .................. 900 128,235
------------
$ 174,859
------------
United Kingdom -- 5.7%
United Kingdom Treasury, 6s, 2028 ............ GBP 39 $ 73,586
United Kingdom Treasury, 7s, 2002 ............ 145 223,356
United Kingdom Treasury, 7.25s, 2007 ......... 152 254,111
United Kingdom Treasury, 8s, 2015 ............ 86 173,124
------------
$ 724,177
------------
Total Foreign Bonds ............................................. $ 5,695,393
------------
U.S. Bonds -- 29.5%
U.S. Treasury Bonds, 6.25s, 2023 ............. $ 761 $ 767,179
U.S. Treasury Notes, 4.25s, 2010 ............. 120 121,795
U.S. Treasury Notes, 5.5s, 2009 .............. 261 249,743
U.S. Treasury Notes, 6.125s, 2007 ............ 1,013 1,006,193
U.S. Treasury Notes, 6.5s, 2010 .............. 243 251,315
U.S. Treasury Notes, 6.75s, 2005 ............. 491 502,431
U.S. Treasury Notes, 8s, 2001 ................ 815 825,057
------------
Total U.S. Bonds ................................................ $ 3,723,713
------------
Total Bonds (Identified Cost, $9,538,727) ....................... $ 9,419,106
------------
</TABLE>
9-GGVA
<PAGE>
<TABLE>
<CAPTION>
Principal Amount
of Contracts
Issuer/Expiration Month/Strike/Price (000 Omitted) Value
<S> <C> <C>
Call Options Purchased -- 0.2%
Japanese Government Bond Future/
August/132.49 ........................... JPY 200,000 $ 20,833
Japanese Yen/July/105 ..................... 60,700 3,885
-----------
Total Call Options Purchased
(Premiums Paid, $26,118) ................................ $ 24,718
-----------
Put Options Purchased
Japanese Yen/July/103 ..................... JPY 59,567 $ 3,812
Japanese Yen/July/108 ..................... 68,018 2,313
Japanese Yen/Euro Dollars/January/130 ..... 3,689 74
-----------
Total Put Options Purchased
(Premiums Paid, $13,481) ............................... $ 6,199
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Short-Term Obligations -- 26.1%
Federal Home Loan Bank, due 7/03/00 at
Amortized Cost ........................ $ 3,295 $ 3,293,797
-----------
Total Investments (Identified Cost, $12,873,326)........ $12,743,820
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
of Contracts
Issuer/Expiration Month/Strike/Price (000 Omitted) Value
<S> <C> <C>
Call Options Written
Australian Dollars/May/0.555 ........... AUD 206 $ (1,062)
Canadian Dollars/September/1.4 ......... CAD 1,058 (72)
-----------
Total Call Options Written
(Premiums Received, $8,796) ......................... $ (1,134)
-----------
Put Options Written -- (0.1%)
Japanese Government Bond Future/
August/132.49 ........................ JPY 200,000 $ (15,931)
Japanese Yen/July/108 .................. 68,018 (2,313)
-----------
Total Put Options Written
(Premiums Received, $25,848)......................... $ (18,244)
-----------
Other Assets,
Less Liabilities -- (0.9%) (119,146)
-----------
Net Assets -- 100.0% .................................. $12,605,296
-----------
</TABLE>
See portfolio footnotes and notes to financial statements.
Portfolio of Investments (Unaudited) -- June 30, 2000
Government Securities Variable Account
Bonds -- 93.1%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Federal Agencies -- 62.0%
Aid to Israel, 6.6s, 2008 ...................... $ 985 $ 964,847
Aid To Peru, 9.98s, 2008 ....................... 1,547 1,674,185
Empresa Energetica Cornito Ltd.,
6.07s, 2010 .................................. 3,869 3,544,314
Federal Home Loan Mortgage Corp.,
6.5s, 2029 ................................... 12,828 12,107,365
Federal Home Loan Mortgage Corp.,
7.5s, 2027 - 2028 ............................ 2,057 2,029,841
Federal Housing Authority, 7.43s, 2022 ......... 3,281 3,177,844
Federal National Mortgage Assn.,
6.132s, 2011 ................................. 935 904,726
Federal National Mortgage Assn.,
6.5s, 2005 - 2027 ............................ 8,508 8,047,716
Federal National Mortgage Assn.,
6.75s, 2003 .................................. 1,947 1,924,305
Federal National Mortgage Assn.,
6.765s, 2020 ................................. 15 14,472
Federal National Mortgage Assn.,
6.859s, 2011 ................................. 3,000 2,969,868
Federal National Mortgage Assn.,
7s, 2029 - 2030 .............................. 14,881 15,515,118
Federal National Mortgage Assn.,
7.27s, 2005 .................................. 3,811 3,749,191
Federal National Mortgage Assn.,
7.5s, 2014 - 2030 ............................ 6,380 6,323,962
Federal National Mortgage Assn.,
8.5s, 2007 ................................... 89 90,404
Federal National Mortgage Assn.,
10s, 2018 .................................... 1,708 1,813,299
Financing Corp., 9.8s, 2018 .................... 5,000 6,316,400
Financing Corp., 10.35s, 2018 .................. 1,950 2,576,438
Resolution Funding Corp., 8.875s, 2020 ......... 3,700 4,518,625
Tennessee Valley Authority, 0s to 2012,
8.25s to 2042 ................................ 7,250 2,915,660
U.S. Department of Housing & Urban
Development, 6.59s, 2016 ..................... 2,045 1,848,230
U.S. Department of Veterans Affairs,
7.5s, 2009 ................................... 3,400 3,419,108
------------
$ 86,445,918
------------
U.S. Government Guaranteed -- 31.1%
Government National Mortgage Association -- 12.6%
GNMA, 7s, 2008 - 2029 .......................... $ 4,630 $ 4,501,185
GNMA, 7.5s, 2023 - 2027 ........................ 4,536 4,505,387
GNMA, 8s, 2026 - 2030 .......................... 8,033 8,123,941
GNMA, 11s, 2010 - 2019 ......................... 291 317,231
GNMA, 12.5s, 2015 - 2015 ....................... 41 45,423
GNMA, 14s, 2014 ................................ 5 6,055
------------
$ 17,499,222
------------
Small Business Administration -- 2.8%
SBA, 8.2s, 2005 ................................ $ 401 $ 410,462
SBA, 8.4s, 2007 ................................ 152 154,322
SBA, 6.24s, 2009 ............................... 2,500 2,246,875
SBA, 8.7s, 2009 ................................ 826 844,629
SBA, 10.05s, 2009 .............................. 209 218,673
------------
$ 3,874,961
------------
</TABLE>
10-GSVA
<PAGE>
Bonds -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Government Guaranteed -- continued
U.S. Treasury Obligations -- 15.7%
U.S. Treasury Bonds,
10.375s, 2012 ........................... $3,300 $ 4,057,449
U.S. Treasury Bonds,
9.875s, 2015 ............................ 5,500 7,457,670
U.S. Treasury Bonds,
3.625s, 2028 ............................ 3,103 2,957,945
U.S. Treasury Notes, 6.5s, 2002 ........... 1,500 1,501,875
U.S. Treasury Notes, 5.875s, 2004 ......... 250 246,368
U.S. Treasury Notes, 4.25s, 2010 .......... 2,544 2,580,405
U.S. Treasury Notes, 6.5s, 2010 ........... 3,000 3,102,660
------------
$ 21,904,372
------------
Total U.S. Government Guaranteed ......................... $ 43,278,555
------------
Total Bonds (Identified Cost, $131,779,868) .............. $129,724,473
------------
Repurchase Agreement -- 6.2%
Merrill Lynch, dated 6/30/00, due 7/3/00,
total to be received $8,705,858
(secured by various U.S. Treasury and
Federal Agency obligations in a jointly
traded account), at Cost ................ $8,701 $ 8,701,000
------------
Total Investments (Identified Cost, $140,480,868)......... $138,425,473
------------
Other Assets,
Less Liabilities -- 0.7% $ 938,728
------------
Net Assets -- 100.0% ................................... $139,364,201
============
</TABLE>
See portfolio footnotes and notes to financial statements.
Portfolio of Investments (Unaudited) -- June 30, 2000
High Yield Variable Account
Bonds -- 90.4%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- 77.7%
Aerospace -- 3.6%
Airplane Pass-Through Trust,
10.875s, 2019+ ............................ $ 741 $ 601,798
Argo Technology Corp., 8.625s, 2007 ......... 1,175 822,500
BE Aerospace, Inc., 8s, 2008 ................ 75 63,375
K & F Industries, Inc., 9.25s, 2007 ......... 1,400 1,323,000
L-3 Communications Corp.,
10.375s, 2007 ............................. 500 508,750
L-3 Communications Corp., 8.5s, 2008 ........ 210 193,200
MOOG, Inc., 10s, 2006 ....................... 1,420 1,412,900
Stellex Industries, Inc., 9.5s, 2007** ...... 75 7,125
United Defense Industries, Inc.,
8.75s, 2007 ............................... 330 305,250
------------
$ 5,237,898
------------
Building Materials -- 6.1%
AAF- McQuay, Inc., 8.875s, 2003 ............. $ 150 $ 129,000
American Standard, Inc., 7.375s, 2008 ....... 3,250 2,949,375
Building Materials Corp., 8.625s, 2006 ...... 1,150 1,000,500
Building Materials Corp., 8s, 2007 .......... 2,000 1,710,000
Formica Corp., 10.875s, 2009 ................ 500 390,000
MMI Products, Inc., 11.25s, 2007 ............ 375 369,375
Nortek, Inc., 9.25s, 2007 ................... 1,300 1,215,500
UDC Homes, Inc., 14.5s, 2000 ................ 3 1,465
Williams Scotsman, Inc., 9.875s, 2007 ....... 1,250 1,125,000
------------
$ 8,890,215
------------
Business Services -- 0.6%
Anacomp, Inc., 10.875s, 2004 ................ $ 500 $ 310,000
Iron Mountain, Inc., 10.125s, 2006 .......... 230 230,000
Pierce Leahy Corp., 11.125s, 2006 ........... 323 331,883
------------
$ 871,883
------------
Chemicals -- 2.2%
Huntsman ICI Holdings, 0s, 2009 ............. $ 100 $ 33,000
Huntsman ICI Holdings, 10.125s, 2009 ........ 700 703,500
Lyondell Chemical Co., 9.625s, 2007 ......... 550 544,500
Lyondell Chemical Co., 9.875s, 2007 ......... 500 495,000
Lyondell Chemical Co., 10.875s, 2009 ........ 225 223,313
Sovereign Specialty Chemicals,
11.875s, 2010## ........................... 530 545,900
Sterling Chemicals, Inc., 12.375s, 2006 ..... 105 109,200
Sterling Chemicals, Inc., 11.25s, 2007 ...... 575 454,250
Sterling Chemicals, Inc., 0s to 2001,
13.5 to 2008 .............................. 300 129,000
------------
$ 3,237,663
------------
Consumer Goods and Services -- 4.2%
American Safety Razor Co., 9.875s, 2005 $1,000 $ 957,500
General Binding Corp., 9.375s, 2008 ......... 860 559,000
Kindercare Learning Centers, Inc.,
9.5s, 2009 ................................ 700 644,000
Polaroid Corp., 11.5s, 2006 ................. 320 332,800
Polymer Group, Inc., 8.75s, 2008 ............ 750 622,500
Remington Products Co. LLC, 11s, 2006 350 295,750
Samsonite Corp., 10.75s, 2008 ............... 1,030 857,475
Sealy Mattress Co., 9.875s, 2007 ............ 165 157,575
Simmons Co., 10.25s, 2009 ................... 740 656,750
Synthetic Industries, Inc., 13s, 2000 ....... 725 714,125
Westpoint Stevens, Inc., 7.875s, 2005 ....... 295 246,325
------------
$ 6,043,800
------------
Container, Forest and Paper Products -- 6.5%
Applied Extrusion Technologies, Inc.,
11.5s, 2002 ............................... $ 325 $ 327,437
Atlantis Plastics, Inc., 11s, 2003 .......... 300 298,875
Buckeye Cellulose Corp., 9.25s, 2008 ........ 1,000 1,002,500
</TABLE>
11-HYVA
<PAGE>
Portfolio of Investments (Unaudited) -- continued
Bonds -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Container, Forest and Paper Products -- continued
Buckeye Technologies, Inc., 8s, 2010 ......... $ 175 $ 158,813
Gaylord Container Corp., 9.375s, 2007 ........ 450 351,000
Gaylord Container Corp., 9.75s, 2007 ......... 970 756,600
Gaylord Container Corp., 9.875s, 2008 ........ 715 464,750
Riverwood International Corp.,
10.25s, 2006 ............................... 1,750 1,662,500
Riverwood International Corp.,
10.875s, 2008 .............................. 550 478,500
Silgan Holdings, Inc., 9s, 2009 .............. 800 756,000
Specialty Paperboard, Inc., 9.375s, 2006 1,400 1,344,000
U.S. Can Corp., 10.125s, 2006 ................ 950 971,375
U.S. Timberlands, 9.625s, 2007 ............... 985 866,800
------------
$ 9,439,150
------------
Corporate Asset Backed -- 0.8%
Merrill Lynch Mortgage Investors, Inc.,
8.434s, 2022+ .............................. $1,000 $ 955,312
Morgan Stanley Capital I Inc.,
7.765s, 2010 ............................... 270 200,444
------------
$ 1,155,756
------------
Energy -- 5.2%
Cheasapeake Energy Corp.,
9.625s, 2005 ............................... $1,230 $ 1,202,325
Clark Refining & Marketing, Inc.,
8.625s, 2008 ............................... 450 353,250
Continental Resources, Inc.,
10.25s, 2008 ............................... 925 827,875
Forest Oil Corp., 10.5s, 2006 ................ 625 635,938
HS Resources, Inc., 9.25s, 2006 .............. 115 112,700
Ocean Energy, Inc., 8.875s, 2007 ............. 3,250 3,233,750
P&L Coal Holdings Corp., 8.875s, 2008 ........ 350 331,625
P&L Coal Holdings Corp., 9.625s, 2008 ........ 855 793,012
------------
$ 7,490,475
------------
Financial Institutions -- 0.3%
Willis Corroon Corp., 9s, 2009 ............... $ 500 $ 418,750
------------
Gaming and Hotels -- 5.4%
Aztar Corp., 8.875s, 2007 .................... $ 925 $ 869,500
Boyd Gaming Corp., 9.5s, 2007 ................ 885 849,600
Coast Hotels & Casinos, Inc., 9.5s, 2009 1,470 1,403,850
Eldorado Resorts LLC, 10.5s, 2006 ............ 845 842,887
Horseshoe Gaming LLC, 8.625s, 2009 ........... 595 559,300
Isle of Capri Casinos, Inc., 8.75s, 2009 ..... 550 506,000
MGM Grand, Inc., 9.75s, 2007 ................. 795 806,925
Prime Hospitality Corp., 9.75s, 2007 ......... 635 609,600
Santa Fe Hotel, Inc., 11s, 2000 .............. 733 722,005
Station Casinos, Inc., 8.875s, 2008 .......... 650 611,000
------------
$ 7,780,667
------------
Industrial -- 4.5%
Allied Waste North America, Inc.,
7.625s, 2006 ............................... $ 295 $ 256,650
Allied Waste North America, Inc.,
10s, 2009 .................................. 85 71,825
Blount, Inc., 13s, 2009 ...................... 400 408,000
Columbus Mckinnon Corp., 8.5s, 2008 .......... 515 448,050
Day International Group, Inc.,
11.125s, 2005 .............................. 950 926,250
Hayes Wheels International, Inc.,
9.125s, 2007 ............................... 825 736,312
Haynes International, Inc., 11.625s, 2004 750 525,000
IMO Industries, Inc., 11.75s, 2006 ........... 920 920,000
International Knife & Saw, Inc.,
11.375s, 2006 .............................. 300 156,000
Newcor, Inc., 9.875s, 2008 ................... 450 135,000
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Industrial -- continued
Numatics, Inc., 9.625s, 2008 ................. $ 170 $ 136,000
Oxford Automotive, Inc., 10.125s, 2007 ....... 65 61,750
Simonds Industries, Inc., 10.25s, 2008 ....... 600 492,750
Thermadyne Holdings Corp., 0s to 2003,
12.5s to 2008 .............................. 1,650 594,000
Thermadyne Manufacturing/Capital
Corp., 9.875s, 2008 ........................ 800 615,000
------------
$ 6,482,587
------------
Media -- 15.6%
Acme Television LLC, 0s to 2000,
10.875s to 2004 ............................ $ 500 $ 477,500
Adelphia Communications Corp.,
8.375s, 2008 ............................... 1,300 1,144,000
Benedek Communications Corp.,
0s to 2001, 13.25s to 2006 ................. 650 507,000
Chancellor Media Corp., 8s, 2008 ............. 3,125 3,136,719
Charter Communications Holdings,
8.25s, 2007 ................................ 3,250 2,876,250
Charter Communications Holdings,
0s to 2004, 9.92s to 2011 .................. 400 230,000
Citadel Broadcasting Co., 9.25s, 2008 ........ 745 726,375
Classic Cable, Inc., 10.5s, 2010 ............. 320 295,200
Cumulus Media, Inc., 10.375s, 2008 ........... 425 369,750
Echostar DBS Corp., 9.375s, 2009 ............. 3,250 3,136,250
FrontierVision Holding LP, 0s to 2001,
11.87s to 2007 ............................. 500 430,000
Frontiervision Operating Partnership LP,
11s, 2006 .................................. 375 378,750
Golden Books Publishing, Inc.,
10.75s, 2004# .............................. 435 195,750
Granite Broadcasting Corp.,
10.375s, 2005 .............................. 155 147,250
Granite Broadcasting Corp.,
8.875s, 2008 ............................... 185 156,325
Hollinger International Publishing,
9.25s, 2007 ................................ 645 635,325
Insight Midwest, 9.75s, 2009 ................. 650 637,000
Liberty Group Operating, Inc.,
9.375s, 2008 ............................... 245 225,400
LIN Holdings Corp., 0s to 2003,
10s to 2008 ................................ 1,150 747,500
Marvel Holdings, Inc., 0s, 1998**++ .......... 1,165 0
NTL Communications Corp., 0s to 2003,
12.375s to 2008 ............................ 1,225 802,375
NTL Communications Corp., 0s to 2004,
9.75s to 2009 .............................. GBP 700 550,587
NTL, Inc., 0s to 2003, 9.75s to 2008 ......... $ 700 437,500
Paxson Communications Corp.,
11.625s, 2002 .............................. 1,000 1,022,500
Telemundo Holdings, Inc., 0s to 2003,
11.5s to 2008 .............................. 1,125 787,500
United International Holdings,
0s to 2003, 10.75s to 2008 ................. 2,350 1,574,500
World Color Press, Inc., 7.75s, 2009 ......... 325 304,151
XM Satellite Radio, Inc., 14s, 2010## ........ 765 673,200
------------
$ 22,604,657
------------
Medical and Health Technology and
Services -- 0.8%
Alaris Medical, Inc., 0s to 2003,
11.125s to 2008 ............................ $ 850 $ 127,500
Prime Medical Services, Inc.,
8.75s, 2008 ................................ 1,300 1,079,000
------------
$ 1,206,500
------------
</TABLE>
12-HYVA
<PAGE>
Portfolio of Investments (Unaudited) -- continued
Bonds -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Metals and Minerals -- 3.1%
AK Steel Corp., 9.125s, 2006 ................ $1,350 $ 1,292,625
Commonwealth Aluminum Corp.,
10.75s, 2006 .............................. 555 549,450
Doe Run Resources Corp., 11.25s, 2005 350 133,000
Jorgensen (Earle M.) Co., 9.5s, 2005 ........ 650 604,500
Kaiser Aluminum & Chemical Corp.,
9.875s, 2002 .............................. 775 744,000
Kaiser Aluminum & Chemical Corp.,
12.75s, 2003 .............................. 175 160,562
Metal Management, Inc., 10s, 2008 ........... 700 350,000
R & B Falcon Corp., 9.5s, 2008 .............. 425 427,125
WCI Steel, Inc., 10s, 2004 .................. 265 251,088
------------
$ 4,512,350
------------
Retail -- 1.8%
Finlay Enterprises, Inc., 9s, 2008 .......... $ 250 $ 223,750
Finlay Fine Jewelry Corp., 8.375s, 2008 ..... 850 765,000
J Crew Group, Inc., 0s to 2002,
13.125s to 2008 ........................... 135 73,238
J.Crew Operating Corp., 10.375s, 2007 ....... 1,080 939,600
Musicland Group, Inc., 9s, 2003 ............. 300 273,000
Musicland Group, Inc., 9.875s, 2008 ......... 340 272,000
------------
$ 2,546,588
------------
Supermarkets -- 0.1%
Jitney-Jungle Stores of America, Inc.,
12s, 2006** ............................... $ 630 $ 137,813
Pathmark Stores, Inc., 10.75s, 2003** ....... 150 13,125
Penn Traffic Co., 11s, 2009 ................. -- 3
------------
$ 150,941
------------
Telecommunications -- 16.5%
Adelphia Communications Corp.,
9.375s, 2009 .............................. $ 225 $ 208,688
Allegiance Telecommunications, Inc.,
0s to 2003, 11.75s to 2008 ................ 800 576,000
Allegiance Telecommunications, Inc.,
12.875s, 2008 ............................. 575 622,437
AMSC Acquisition Co., Inc., 12.25s, 2008 600 468,000
Centennial Cellular Operating Co.,
10.75s, 2008 .............................. 815 794,625
Crown Castle International Corp.,
10.75s, 2011 .............................. 435 441,525
Dobson Communications Corp.,
10.875s, 2010## ........................... 445 446,113
DTI Holdings, Inc., 0s to 2003,
12.5s to 2008 ............................. 1,450 610,813
Exodus Communications, Inc.,
11.25s, 2008 .............................. 600 594,000
Exodus Communications, Inc.,
10.75s, 2009 .............................. 200 193,000
Exodus Communications, Inc.,
11.625s, 2010## ........................... 660 663,300
Focal Communications Corp.,
0s to 2003, 12.125 to 2008 ................ 375 253,125
Focal Communications Corp.,
11.875s, 2010## ........................... 350 352,625
Globix Corp., 12.5s, 2010 ................... 390 323,700
Hyperion Telecommunication, Inc.,
12s, 2007 ................................. 540 502,200
ICG Holdings, Inc., 0s to 2001,
12.5s to 2006 ............................. 675 558,563
ITC Deltacom, Inc., 9.75s, 2008 ............. 1,020 969,000
Level 3 Communications, Inc.,
9.125s, 2008 .............................. 3,000 2,692,500
Level 3 Communications, Inc.,
10.75s, 2008## ............................ EUR 225 206,408
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Telecommunications -- continued
Madison River, 13.25s, 2010## ............... $ 235 $ 211,500
McCaw International Ltd., 0s to 2002,
13s to 2007 ............................... 200 147,000
Metromedia Fiber Network, Inc., 10s, 2008 825 814,687
MGC Communications, Inc., 13s, 2010## 1,090 1,013,700
MJD Communications, Inc., 9.5s, 2008 ........ 625 556,250
Nextel Communications, Inc., 0s to 2002,
9.75s to 2007 ............................. 160 120,000
Nextel Communications, Inc., 0s to 2003,
9.95s to 2008 ............................. 1,660 1,224,250
Nextel International, Inc., 0s to 2003,
12.125 to 2008 ............................ 775 507,625
Nextlink Communications, Inc.,
10.75s, 2009 .............................. 800 792,000
Nextlink Communications, Inc.,
0s to 2004, 12.25s to 2009 ................ 275 170,500
Northeast Optic Network, 12.75s, 2008 ....... 550 525,250
Northpoint Commerce Group, Inc.,
12.875s, 2010## ........................... 415 290,500
PSINET, Inc., 10.5s, 2006 ................... 500 460,000
PSINET, Inc., 11.5s, 2008 ................... 450 423,000
PSINET, Inc., 11s, 2009 ..................... 850 790,500
Rural Cellular Corp., 9.625s, 2008 .......... 450 436,500
Spectrasite Holdings, Inc., 0s to 2003,
12s to 2008 ............................... 660 458,700
Spectrasite Holdings, Inc., 0s to 2004,
11.25 to 2009 ............................. 1,750 1,023,750
Spectrasite Holdings, Inc.,
10.75s, 2010## ............................ 255 254,362
Time Warner Telecommunications LLC,
9.75s, 2008 ............................... 500 485,000
Verio, Inc., 10.625s, 2009 .................. 200 221,750
Viatel, Inc., 11.25s, 2008 .................. 600 444,000
Viatel, Inc., 0s to 2003, 12.5s to 2008 ..... 275 129,250
Voicestream Wireless Corp.,
10.375s, 2009 ............................. 145 149,350
Western Wireless Corp., 10.5s, 2007 ......... 750 772,500
------------
$ 23,898,546
------------
Utilities -- Electric -- 0.4%
International Utility Structures,
10.75s, 2008 .............................. $ 625 $ 512,500
------------
Total U.S. Bonds .............................................. $112,480,926
------------
Foreign Bonds -- 12.7%
Bermuda -- 1.0%
Global Crossing Holdings Ltd.,
9.625s, 2008 (Telecommunications) ......... $1,250 $ 1,218,750
Globenet Communications Group,
13s, 2007 (Telecommunications) ............ 300 302,625
------------
$ 1,521,375
------------
Canada -- 1.6%
GT Group Telecom, Inc., 0s to 2005,
13.25 to 2010 (Telecommunications)##....... $1,050 $ 582,750
PCI Chemicals Canada, Inc., 9.25s, 2007
(Chemicals) ............................... 590 389,400
Russel Metals, Inc., 10s, 2009
(Metals and Minerals) ..................... 530 504,163
Telesystem International Wireless, Inc.,
0s to 2002, 13.25s to 2007
(Telecommunications) ...................... 825 573,375
Worldwide Fiber, Inc., 12s, 2009
(Telecommunications) ...................... 350 330,750
------------
$ 2,380,438
------------
</TABLE>
13-HYVA
<PAGE>
Portfolio of Investments (Unaudited) -- continued
Bonds -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Germany -- 0.6%
Callahan Nordrhein Westfalen, 14s, 2010
(Media)## .......................................... $ 830 $ 830,000
------------
Greece -- 0.1%
Fage Dairy Industries S.A., 9s, 2007
(Food & Beverage Products) ......................... $ 260 $ 208,000
------------
Ireland -- 1.0%
British Telecom PLC, 11.875s, 2008
(Telecommunications) ............................... $ 825 $ 971,000
Esat Holdings Ltd., 0s to 2002,
12.5s to 2007 (Telecommunications) ................. 550 519,750
------------
$ 1,490,750
------------
Luxembourg -- 0.5%
Millicom International Cellular,
0s to 2001, 13.50s to 2006
(Telecommunications) ............................... $ 330 $ 283,800
PTC International Finance II S.A., 11.25s,
2009 (Telecommunications) .......................... 370 376,475
------------
$ 660,275
------------
Mexico -- 0.2%
Satelites Mexicanos S.A. de C.V.,
10.125s, 2004 (Telecommunications) ................. $ 450 $ 301,500
------------
Netherlands -- 2.8%
Completel Europe N.V., 0s to 2004,
14s to 2009 (Telecommunications) ................... $1,200 $ 576,000
Hermes Europe Railtel B.V., 10.375s,
2009 (Telecommunications) .......................... 950 798,000
Tele1 Europe B.V., 13s, 2009
(Telecommunications) ............................... 700 710,500
United Pan Europe, 10.875s, 2009
(Media) ............................................ 500 425,000
United Pan Europe, 11.25s, 2010
(Media) ............................................ 500 445,000
Versatel Telecom B.V., 13.25s, 2008
(Telecommunications) ............................... 1,100 1,122,000
------------
$ 4,076,500
------------
Norway -- 0.1%
Ocean Rig Norway AS, 10.25s, 2008
(Energy) ........................................... $ 100 $ 83,000
------------
Spain -- 0.8%
Jazztel PLC, 13.25s, 2009
(Telecommunications) ............................... EUR 475 $ 420,561
Jazztel PLC, 14s, 2009
(Telecommunications) ............................... $ 750 690,000
------------
$ 1,110,561
------------
United Kingdom -- 4.0%
Colt Telecom Group PLC, 0s to 2001,
12s to 2006 (Telecommunications) ................... $2,050 $ 1,804,000
Dolphin Telecom PLC, 0s to 2003,
11.50 to 2008 (Telecommunications) ................. 1,500 562,500
Dolphin Telecom PLC, 0s to 2004,
14s to 2009 (Telecommunications) ................... 530 174,900
Energis PLC, 9.75s, 2009
(Telecommunications) ............................... 450 441,000
Esprit Telecom Group PLC, 11.5s, 2007
(Telecommunications)## ............................. 300 213,000
Ono Finance PLC, 13s, 2009 (Media) ................... 1,225 1,163,750
Telewest Communications PLC,
9.625s, 2006 (Media) ............................... 350 329,000
Telewest Communications PLC,
0s to 2000, 11s to 2007 (Media) .................... 265 251,087
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
United Kingdom -- continued
Telewest Communications PLC,
11.25s, 2008 (Media) ............................... $ 250 $ 255,000
Telewest Communications PLC, 0s to
2004, 9.25s to 2009 (Media) ........................ 400 216,000
Telewest Communications PLC, 0s to
2005, 11.375s to 2010 (Media)## .................... 300 160,500
Telewest Communications PLC,
9.875s, 2010 (Media)## ............................. 170 158,100
------------
$ 5,728,837
------------
Total Foreign Bonds .................................................. $ 18,391,236
------------
Total Bonds (Identified Cost, $143,907,016) .......................... $130,872,162
------------
Shares
Stocks -- 1.3%
Foreign Stocks -- 1.1%
Netherlands -- 0.9%
Completel Europe N.V., ADR
(Telecommunications)* .............................. 60,000 $ 600,000
Versatel Telecom International N.V., ADR
(Telecommunications)* .............................. 14,417 621,733
------------
$ 1,221,733
------------
United Kingdom -- 0.2%
Colt Telecom Group PLC, ADR
(Telecommunications)* .............................. 2,175 $ 294,984
------------
Total Foreign Stocks ................................................. $ 1,516,717
------------
U.S. Stocks -- 0.2%
Building
Atlantic Gulf Communities Corp.*+ .................... 150 $ 12
------------
Business Services
Envirosource, Inc.*+ ................................. 238 $ 111
------------
Consumer Goods and Services -- 0.1%
Ranger Industries, Inc.* ............................. 123,210 $ 192,516
------------
Media
Golden Books Family Entertainment,
Inc.* .............................................. 21,250 $ 18,594
------------
Telecommunications -- 0.1%
Classic Communications, Inc.*##++ .................... 1,350 $ 10,800
Viatel, Inc.* ........................................ 4,265 121,819
------------
$ 132,619
------------
Total U.S. Stocks .................................................... $ 343,852
------------
Total Stocks (Identified Cost, $3,119,246) ........................... $ 1,860,569
------------
Preferred Stocks -- 2.5%
Consumer Goods and Services
Renaissance Cosmetics, Inc. 14s*# .................... 975 $ 0
------------
Media -- 1.8%
CSC Holdings, Inc., 11.125s*# ........................ 16,051 $ 1,689,368
Primedia, Inc., 8.625s ............................... 11,500 989,000
------------
$ 2,678,368
------------
Telecommunications -- 0.7%
Crown Castle International
Corp.,12.75s*# ..................................... 361 $ 368,220
Global Crossings Holdings Ltd.,10.5s# ................ 1,700 167,025
Nextel Communications, Inc. 13s* ..................... 78 83,460
Rural Cellular Corp. 11.375s# ........................ 446 419,240
------------
$ 1,037,945
------------
Total Preferred Stocks (Identified Cost, $3,766,557).................. $ 3,716,313
------------
</TABLE>
14-HYVA
<PAGE>
Warrants -- 0.5%
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Allegiance Telecommunications, Inc.,
(Telecommunications)* .................... 1,150 $ 19,550
DTI Holdings, Inc.,
(Telecommunications)* .................... 7,250 72
Esat Holdings Ltd.,
(Telecommunications) *## ................. 550 123,750
ICO, Inc., (Energy)* ....................... 375,000 228,750
Jazztel PLC, (Telecommunications)*## ....... 810 79,855
Knology, Inc., (Telecommunications)*## ..... 500 1,250
Loral Orion Network Systems, Inc.,
(Telecommunications)* .................... 1,000 7,000
Loral Orion Network Systems, Inc.,
(Telecommunications)* .................... 1,100 18,700
McCaw International Ltd.,
(Telecommunications)*## .................. 700 1,400
Metronet Communications Corp.,
(Media)*## ............................... 600 66,000
Motient Corp., (Telecommunications)*##...... 600 24,000
Ono Finance PLC, (Media)* .................. 1,225 122,500
Renaissance Cosmetics, Inc.,
(Consumer Goods and Services)* ........... 788 0
------------
Total Warrants (Identified Cost, $203,697)................. $ 692,827
------------
Short-Term Obligations -- 4.2%
Principal Amount
(000 Omitted)
Associates First Capital Corp., due
7/03/00 .................................. $ 5,000 $ 4,998,084
Federal Home Loan Bank, due 7/03/00 ........ 1,087 1,086,603
------------
Total Short-Term Obligations, at Amortized Cost ........... $ 6,084,687
------------
Total Investments (Identified Cost, $157,081,203).......... $143,226,558
------------
Other Assets, Less Liabilities -- 1.1% ..................... 1,547,879
------------
Net Assets -- 100.0% ...................................... $144,774,437
============
</TABLE>
See portfolio footnotes and notes to financial statements.
Portfolio of Investments (Unaudited) -- June 30, 2000
Managed Sectors Variable Account
Stocks -- 92.7%
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Consumer Goods and Services -- 0.8%
Anheuser-Busch Cos., Inc. ....................... 4,200 $ 313,687
Coca-Cola Co. ................................... 10,100 580,119
Keebler Foods Co. ............................... 8,800 326,700
PepsiCo., Inc. .................................. 7,700 342,169
Philip Morris Cos., Inc. ........................ 2,600 69,063
------------
$ 1,631,738
------------
Energy -- 5.0%
Anadarko Petroleum Corp. ........................ 11,100 $ 547,369
Apache Corp. .................................... 6,600 388,163
Baker Hughes, Inc. .............................. 45,100 1,443,200
Devon Energy Corp. .............................. 9,800 550,637
EOG Resources, Inc. ............................. 77,900 2,609,650
Global Marine, Inc.* ............................ 30,700 865,356
Halliburton Co. ................................. 14,100 665,344
Kerr McGee Corp. ................................ 1,900 111,981
Noble Affiliates, Inc. .......................... 2,300 85,675
Noble Drilling Corp.* ........................... 38,900 1,602,194
Transocean Sedco Forex, Inc. .................... 13,900 742,781
Weatherford International, Inc.* ................ 32,000 1,274,000
------------
$ 10,886,350
------------
Financial Services -- 5.7%
American Express Co. ............................ 7,100 $ 370,088
American International Group, Inc. .............. 26,400 3,102,000
AXA Financial, Inc. ............................. 20,800 707,200
Charter One Financial, Inc. ..................... 25,800 593,400
CIGNA Corp. ..................................... 4,700 439,450
Citigroup, Inc. ................................. 22,600 1,361,650
Comerica, Inc. .................................. 17,000 762,875
First Data Corp. ................................ 17,400 863,475
Fiserv, Inc.* ................................... 2,300 99,475
Golden West Financial Corp. ..................... 18,600 759,112
Hartford Financial Services Group, Inc. ......... 2,300 128,656
Household International, Inc. ................... 7,700 320,031
Mellon Financial Corp. .......................... 15,300 557,494
Merrill Lynch & Co., Inc. ....................... 15,600 1,794,000
PNC Bank Corp. .................................. 8,400 393,750
Providian Financial Corp. ....................... 300 27,000
State Street Corp. .............................. 200 21,213
------------
$ 12,300,869
------------
Healthcare -- 15.2%
Abbott Laboratories, Inc. ....................... 33,900 $ 1,510,669
Abgenix, Inc.* .................................. 6,700 803,058
Affymetrix, Inc.* ............................... 1,800 297,225
Alkermes, Inc.* ................................. 4,000 188,500
Allergan, Inc. .................................. 10,200 759,900
Alza Corp.* ..................................... 8,100 478,913
American Home Products Corp. .................... 200 11,750
Amgen, Inc.* .................................... 21,500 1,510,375
Amylin Pharmaceuticals, Inc.* ................... 13,400 203,513
Andrx Corp.* .................................... 19,200 1,227,300
Bausch & Lomb, Inc. ............................. 7,600 588,050
BioSource International, Inc.* .................. 20,800 462,800
BioSphere Medical, Inc.* ........................ 700 9,800
Bristol-Myers Squibb Co. ........................ 6,200 361,150
Cardinal Health, Inc. ........................... 4,000 296,000
Celgene Corp.* .................................. 8,200 482,775
CV Therapeutics, Inc.* .......................... 3,100 214,869
Express Scripts, Inc.* .......................... 13,200 820,050
Forest Laboratories, Inc.* ...................... 4,300 434,300
Genentech, Inc.* ................................ 13,900 2,390,800
Human Genome Sciences, Inc.* .................... 10,300 1,373,762
Immunex Corp.* .................................. 34,800 1,720,425
</TABLE>
15-HYVA
<PAGE>
Portfolio of Investments (Unaudited) -- continued
Stocks -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Healthcare -- continued
IVAX Corp.* ................................. 11,800 $ 489,700
Medarex, Inc.* .............................. 4,100 346,450
Medigene AG (Germany)* ...................... 360 23,369
MedImmune, Inc.* ............................ 20,900 1,546,600
Merrill Lynch Biotech Holding Company
Depository Receipts* ...................... 6,100 1,085,800
Millennium Pharmaceuticals, Inc.* ........... 9,500 1,062,812
PE Corp.-PE Biosystems Group ................ 22,100 1,455,837
Pfizer, Inc. ................................ 88,450 4,245,600
Pharmacia Corp. ............................. 2,190 113,196
Protein Design Labs, Inc.* .................. 1,200 197,944
QIAGEN N.V. (Netherlands)* .................. 700 121,800
Quest Diagnostics, Inc.* .................... 13,200 986,700
Sepracor, Inc.* ............................. 25,000 3,015,625
St. Jude Medical, Inc.* ..................... 14,500 665,187
Teva Pharmaceutical Industries Ltd.,
ADR (Israel) .............................. 26,300 1,458,006
------------
$ 32,960,610
------------
Industrial Goods and Services -- 1.5%
C & D Technologies, Inc. .................... 5,500 $ 310,750
Capstone Turbine Corp.* ..................... 230 10,364
Emerson Electric Co. ........................ 400 24,150
Grant Pride Co., Inc.* ...................... 19,100 477,500
Millipore Corp. ............................. 1,600 120,600
Power One, Inc.* ............................ 16,700 1,902,756
Tyco International Ltd. (Bermuda) ........... 7,700 364,788
------------
$ 3,210,908
------------
Leisure -- 1.1%
Clear Channel Communications, Inc.* ......... 4,500 $ 337,500
USA Networks, Inc.* ......................... 18,900 408,712
Viacom, Inc., "B"* .......................... 18,300 1,247,831
Victor Company of Japan (Japan) ............. 36,000 317,308
------------
$ 2,311,351
------------
Retail -- 0.6%
Albertsons, Inc. ............................ 3,200 $ 106,400
CVS Corp. ................................... 600 24,000
Kohl's Corp.* ............................... 400 22,250
Kroger Co.* ................................. 2,400 52,950
RadioShack Corp.* ........................... 5,500 260,562
Safeway, Inc.* .............................. 15,800 712,975
Wal-Mart Stores, Inc. ....................... 350 20,169
------------
$ 1,199,306
------------
Technology -- 39.4%
Akamai Technologies, Inc.* .................. 6,600 $ 783,647
Altera Corp.* ............................... 7,100 723,756
Amdocs Ltd.* ................................ 12,700 974,725
Analog Devices, Inc.* ....................... 41,900 3,184,400
Applied Materials, Inc.* .................... 8,100 734,062
Ariba, Inc.* ................................ 4,000 392,188
ARM Holdings PLC, ADR
(United Kingdom)* ......................... 24,200 795,575
Art Technology Group, Inc.* ................. 3,000 302,813
Atmel Corp.* ................................ 12,700 468,312
Automatic Data Processing, Inc. ............. 26,600 1,424,762
BEA Systems, Inc.* .......................... 700 34,606
Brocade Communications Systems, Inc.* 4,500 825,680
Cabletron Systems, Inc.* .................... 1,200 30,300
Check Point Software Technologies Ltd.
(Israel)* ................................. 14,000 2,964,500
Cisco Systems, Inc.* ........................ 80,700 5,129,494
Coherent, Inc.* ............................. 4,100 343,888
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Technology -- continued
Compaq Computer Corp. ....................... 12,000 $ 306,750
Computer Associates International, Inc. ..... 300 15,356
Computer Sciences Corp.* .................... 2,400 179,250
Dell Computer Corp.* ........................ 8,200 404,363
E.piphany, Inc.* ............................ 4,000 428,750
EMC Corp.* .................................. 50,400 3,877,650
Emulex Corp.* ............................... 5,200 341,575
Entrust Technologies, Inc.* ................. 7,400 612,350
Ericsson LM, ADR (Sweden) ................... 56,900 1,138,000
Extreme Networks, Inc.* ..................... 3,200 337,600
Flextronics International Ltd.* ............. 19,200 1,318,800
Foundry Networks, Inc.* ..................... 2,900 319,000
General Electric Co. ........................ 21,400 1,134,200
Global Crossing Ltd. (Bermuda)* ............. 25,500 670,969
I2 Technologies, Inc.* ...................... 3,900 406,636
Integrated Device Technology, Inc.** ........ 5,100 305,363
Intel Corp. ................................. 47,000 6,283,312
Internet Commerce Corp.* .................... 3,800 55,100
Jabil Circuit, Inc.* ........................ 2,800 138,950
JDS Uniphase Corp.* ......................... 12,042 1,443,535
Juniper Networks, Inc.* ..................... 13,300 1,935,981
Lam Research Corp.* ......................... 3,700 138,750
Lightspan, Inc.* ............................ 360 1,980
LSI Logic Corp.* ............................ 27,700 1,499,262
Lucent Technologies, Inc. ................... 1,900 112,575
Macromedia, Inc.* ........................... 2,200 212,713
Mercury Interactive Corp.* .................. 5,600 541,800
Metromedia Fiber Network, Inc., "A"* ........ 69,920 2,774,950
Micron Technology, Inc.* .................... 86,100 7,582,181
Microsoft Corp.* ............................ 20,100 1,608,000
Mobility Electronics, Inc.* ................. 4,490 58,370
Motorola, Inc. .............................. 2,800 81,375
National Semiconductor Corp.* ............... 24,100 1,367,675
New Focus, Inc.* ............................ 160 13,140
Nokia Corp., ADR (Finland) .................. 22,900 1,143,569
Novellus Systems, Inc.* ..................... 500 28,281
Oracle Corp.* ............................... 46,800 3,934,125
PMC-Sierra, Inc.* ........................... 5,600 995,050
Sanmina Corp.* .............................. 12,300 1,051,650
SAP AG, ADR (Germany) ....................... 400 18,775
SDL, Inc.* .................................. 3,700 1,055,194
Seagate Technology, Inc.* ................... 5,500 302,500
Siebel Systems, Inc.* ....................... 9,200 1,504,775
Solectron Corp.* ............................ 600 25,125
Stanford Microdevices, Inc.* ................ 2,900 125,969
StorageNetworks, Inc.* ...................... 360 32,490
Sun Microsystems, Inc.* ..................... 32,980 2,999,119
Sycamore Networks, Inc.* .................... 15,500 1,710,812
Tektronix, Inc. ............................. 1,600 118,400
Teradyne, Inc.* ............................. 6,800 499,800
Texas Instruments, Inc. ..................... 2,400 164,850
TIBCO Software, Inc.* ....................... 6,500 697,023
VeriSign, Inc.* ............................. 24,882 4,391,673
VERITAS Software Corp.* ..................... 21,500 2,429,836
Waters Corp.* ............................... 10,800 1,347,975
Xilinx, Inc.* ............................... 46,900 3,872,181
------------
$ 85,208,141
------------
Utilities and Communications -- 23.4%
ADC Telecommunications, Inc. * .............. 37,547 $ 3,149,255
AES Corp.* .................................. 54,600 2,491,125
Aether Systems, Inc.* ....................... 1,800 369,000
Alcatel Alsthom Compagnie, ADR
(France) .................................. 16,600 1,103,900
Allegiance Telecom, Inc.* ................... 3,700 236,800
AT&T Corp., "A"* ............................ 39,100 948,175
</TABLE>
16-MSVA
<PAGE>
Stocks -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Utilities and Communications -- continued
Audio Codes Ltd. (Israel)* .................. 1,900 $ 228,000
Calpine Corp.* .............................. 38,700 2,544,525
CIENA Corp.* ................................ 25,100 4,183,856
Coastal Corp. ............................... 20,400 1,241,850
Comverse Technology, Inc.* .................. 13,100 1,218,300
Conductus, Inc.* ............................ 15,400 304,150
Corning, Inc. ............................... 23,100 6,234,112
Digital Ligtware, Inc.* ..................... 6,300 633,544
Dynegy, Inc. ................................ 6,100 416,706
Enron Corp. ................................. 4,800 309,600
Harris Corp. ................................ 3,600 117,900
Intermedia Communications, Inc.* ............ 200 5,950
Linear Technology Corp. ..................... 20,700 1,323,506
Marvell Technology Group Ltd.* .............. 200 11,400
McLeodUSA, Inc., "A"* ....................... 4,500 93,094
MGC Communications, Inc.* ................... 6,600 395,588
MRV Communications, Inc.* ................... 19,000 1,277,750
NEXTEL Communications, Inc.* ................ 8,700 532,331
Nextlink Communications, Inc., "A"* ......... 1,200 45,525
Nortel Networks Corp. (Canada) .............. 123,200 8,408,400
ONI Systems Corp.* .......................... 320 37,505
Quanta Services, Inc.* ...................... 3,800 209,000
Rational Software Corp.* .................... 5,300 492,569
Redback Networks, Inc.* ..................... 7,200 1,281,600
Scientific-Atlanta, Inc. .................... 8,900 663,050
Sonera Oyj (Finland) ........................ 9,500 433,031
Sprint Corp. ................................ 3,600 183,600
Sprint Corp. (PCS Group)* ................... 39,900 2,374,050
Tellabs, Inc.* .............................. 24,400 1,669,875
Tollgrade Communications, Inc.* ............. 3,200 424,000
Vodafone AirTouch PLC*
(United Kingdom) .......................... 296,953 1,199,287
Vodafone AirTouch PLC, ADR
(United Kingdom) .......................... 13,400 555,262
Voicestream Wireless Corp.* ................. 12,468 1,449,989
WorldCom, Inc.* ............................. 41,600 1,908,400
------------
$ 50,705,560
------------
Total Stocks (Identified Cost, $182,029,423) ......... $200,414,833
------------
Warrant
Acclaim Entertainment, Inc.* (Identified
Cost, $0).................................. 3,316 $ 1,969
------------
Short-Term Obligations -- 8.1%
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
(000 Omitted)
<S> <C> <C>
Federal Home Loan Bank, due 7/03/00 ......... $ 3 $ 2,999
General Electric Capital Corp., due
7/03/00 ................................... 5,000 4,998,069
Morgan Stanley Dean Witter, due
7/05/00 ................................... 6,625 6,619,958
Salomon Smith Barney Holdings, Inc.,
due 7/03/00 ............................... 6,000 5,997,733
------------
Total Short-Term Obligations, at Amortized Cost ........ $ 17,618,759
------------
Total Investments (Identified Cost, $199,648,182)......... 218,035,561
------------
Other Assets,
Less Liabilities -- (0.8%) ............................. (1,745,979)
------------
Net Assets -- 100.0% ................................... $216,289,582
============
</TABLE>
See portfolio footnotes and notes to financial statements.
Portfolio of Investments (Unaudited) -- June 30, 2000
Money Market Variable Account
Commercial Paper -- 79.9%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
American Express Credit Corp.,
due 8/17/00 .............................. $ 3,000 $ 2,974,424
American General Corp., due 8/28/00 ........ 4,000 3,957,144
Associates Corp. of North America,
due 7/03/00 .............................. 3,500 3,498,658
AT&T Corp., due 7/10/00 .................... 4,000 3,993,440
Bell Atlantic Financial Services,
due 8/16/00 .............................. 3,500 3,470,707
Bellsouth Telecomm, Inc., due 7/26/00 ...... 231 229,948
Campbell Soup Co., due 9/15/00 ............. 3,500 3,451,603
Caterpillar Financial Services,
due 9/28/00 .............................. 3,000 2,951,273
Du Pont (E.I.) de Nemours & Co., Inc.,
due 8/18/00 .............................. 3,000 2,973,800
Duke Power Co., due 7/18/00 ................ 3,000 2,990,792
Ford Motor Credit Corp., due 8/15/00 ....... 3,000 2,975,550
Gannett, Inc., due 7/13/00 ................. 4,000 3,991,347
General Electric Capital Corp.,
due 8/21/00 .............................. 3,500 3,467,572
General Mills, Inc., due 7/20/00 ........... 3,500 3,487,901
Goldman Sachs Group LP, due 8/08/00 ........ 3,500 3,475,764
Halliburton Corp., due 9/18/00 ............. 3,600 3,548,176
Kellogg Co., due 8/09/00 ................... 3,500 3,475,278
Merrill Lynch & Co., Inc., due 8/11/00 ..... 3,500 3,473,931
Metropolitan Life Funding, Inc.,
due 8/03/00 .............................. 3,000 2,981,987
Morgan Stanley Dean Witter, due
7/07/00 .................................. 5,000 4,994,608
Motorola, Inc., due 8/25/00 ................ 3,500 3,465,083
Pitney Bowes Credit Corp., due 7/05/00 ..... 4,000 3,997,098
Salomon Smith Barney Holdings, Inc.,
due 8/10/00 .............................. 3,500 3,474,489
-----------
Total Commercial Paper, at Amortized
Cost and Value .......................................... $77,300,573
-----------
U.S. Government and Agency
Obligations -- 20.6%
Federal Home Loan Bank, due 7/03/00 ........ $ 7,950 $ 7,947,113
Federal National Mortgage Assn., due
7/19/00 - 8/23/00 ........................ 12,000 11,918,361
-----------
Total U.S. Government and Agency Obligations,
at Amortized Cost and Value ............................. $19,865,474
-----------
Total Investments, at Amortized Cost and Value ............ $97,166,047
Other Assets,
Less Liabilities -- (0.5%) ................................ (435,372)
-----------
Net Assets -- 100.0% ...................................... $96,730,675
===========
</TABLE>
See portfolio footnotes and notes to financial statements.
17-MMVA
<PAGE>
Portfolio of Investments (Unaudited) -- continued
Total Return Variable Account
Stocks -- 57.3%
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. Stocks -- 49.5%
Aerospace -- 2.1%
Boeing Co. ..................................... 37,500 $ 1,567,969
Honeywell International, Inc. .................. 21,100 710,806
TRW, Inc. ...................................... 37,300 1,617,887
United Technologies Corp. ...................... 19,900 1,171,613
------------
$ 5,068,275
------------
Automotive -- 0.7%
Delphi Automotive Systems Corp. ................ 87,200 $ 1,269,850
Ford Motor Co. ................................. 9,800 421,400
Visteon Corp.* ................................. 1,283 15,556
------------
$ 1,706,806
------------
Banks and Credit Companies -- 1.6%
Bank America Corp. ............................. 31,000 $ 1,333,000
Bank of New York Co., Inc. ..................... 13,500 627,750
Bank One Corp. ................................. 5,700 151,406
PNC Bank Corp. ................................. 35,000 1,640,625
------------
$ 3,752,781
------------
Biotechnology -- 1.9%
Abbott Laboratories, Inc. ...................... 52,400 $ 2,335,075
Pharmacia Corp. ................................ 43,209 2,233,365
------------
$ 4,568,440
------------
Business Machines -- 0.3%
Hewlett-Packard Co. ............................ 1,000 $ 124,875
International Business Machines Corp. .......... 3,000 328,688
Xerox Corp. .................................... 17,800 369,350
------------
$ 822,913
------------
Business Services -- 0.5%
Automatic Data Processing, Inc. ................ 18,900 $ 1,012,331
United Parcel Service, Inc. .................... 4,590 270,810
------------
$ 1,283,141
------------
Cellular Telephones -- 0.9%
Motorola, Inc. ................................. 32,700 $ 950,344
Telephone & Data Systems, Inc. ................. 12,000 1,203,000
------------
$ 2,153,344
------------
Chemicals -- 1.2%
Air Products & Chemicals, Inc. ................. 30,200 $ 930,538
Rohm & Haas Co. ................................ 59,600 2,056,200
------------
$ 2,986,738
------------
Computer Software -- Personal Computers -- 0.3%
Microsoft Corp.* ............................... 8,000 $ 640,000
------------
Conglomerates -- 0.2%
Eastern Enterprises Co. ........................ 6,500 $ 409,500
Tyco International Ltd. ........................ 3,720 176,235
------------
$ 585,735
------------
Consumer Goods and Services -- 0.4%
Fortune Brands, Inc. ........................... 15,000 $ 345,938
Kimberly-Clark Corp. ........................... 10,100 579,487
------------
$ 925,425
------------
Electrical Equipment -- 1.5%
Emerson Electric Co. ........................... 57,900 $ 3,495,713
General Electric Co. ........................... 2,000 106,000
------------
$ 3,601,713
------------
Electronics
Agilent Technologies, Inc.* .................... 381 $ 28,099
------------
Energy -- 1.1%
Devon Energy Corp. ............................. 40,100 $ 2,253,119
Sierra Pacific Resources Co. ................... 25,856 324,816
------------
$ 2,577,935
------------
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Entertainment -- 1.2%
Disney (Walt) Co. .............................. 3,300 $ 128,081
Harrah's Entertainment, Inc.* .................. 48,000 1,005,000
Time Warner, Inc. .............................. 17,500 1,330,000
Viacom, Inc., "B"* ............................. 7,595 517,884
------------
$ 2,980,965
------------
Financial Institutions -- 2.1%
Citigroup, Inc. ................................ 31,200 $ 1,879,800
Edwards (A.G.), Inc. ........................... 33,200 1,294,800
Freddie Mac Corp. .............................. 18,900 765,450
Merrill Lynch & Co., Inc. ...................... 9,000 1,035,000
------------
$ 4,975,050
------------
Financial Services -- 1.9%
AXA Financial, Inc. ............................ 64,200 $ 2,182,800
Mellon Financial Corp. ......................... 64,800 2,361,150
------------
$ 4,543,950
------------
Food and Beverage Products -- 1.7%
Archer-Daniels-Midland Co. ..................... 74,454 $ 730,580
General Mills, Inc. ............................ 22,300 852,975
Hershey Foods Corp. ............................ 7,800 378,300
McCormick & Co., Inc. .......................... 8,900 289,250
Quaker Oats Co. ................................ 23,700 1,780,462
------------
$ 4,031,567
------------
Forest and Paper Products -- 0.2%
Bowater, Inc. .................................. 10,600 $ 467,725
------------
Gas -- 0.4%
Sunoco, Inc. ................................... 30,500 $ 897,844
------------
Healthcare -- 0.2%
HCA Healthcare Co.* ............................ 15,000 $ 455,625
------------
Insurance -- 5.9%
Allstate Corp. ................................. 12,200 $ 271,450
American International Group, Inc. ............. 1,325 155,688
Chubb Corp. .................................... 10,000 615,000
CIGNA Corp. .................................... 9,600 897,600
Hartford Financial Services Group, Inc. ........ 68,600 3,837,312
Jefferson Pilot Corp. .......................... 11,750 663,141
Lincoln National Corp. ......................... 56,800 2,051,900
Marsh & McLennan Cos., Inc. .................... 21,600 2,255,850
MetLife, Inc.* ................................. 26,640 561,105
ReliaStar Financial Corp. ...................... 13,800 723,637
St. Paul Cos., Inc. ............................ 67,600 2,306,850
------------
$ 14,339,533
------------
Machinery -- 1.3%
Deere & Co., Inc. .............................. 51,100 $ 1,890,700
Ingersoll Rand Co. ............................. 22,900 921,725
W.W. Grainger, Inc. ............................ 14,700 452,944
------------
$ 3,265,369
------------
Medical and Health Products -- 1.6%
American Home Products Corp. ................... 36,000 $ 2,115,000
Baxter International, Inc. ..................... 4,100 288,281
Bristol-Myers Squibb Co. ....................... 27,200 1,584,400
------------
$ 3,987,681
------------
Metals and Minerals -- 0.1%
Alcoa, Inc. .................................... 10,600 $ 307,400
------------
Oil Services -- 2.8%
Halliburton Co. ................................ 65,400 $ 3,086,063
Noble Drilling Corp.* .......................... 91,100 3,752,181
------------
$ 6,838,244
------------
Oils -- 5.3%
Apache Corp. ................................... 21,300 $ 1,252,706
Chevron Corp. .................................. 5,500 466,469
</TABLE>
18-TRVA
<PAGE>
Portfolio of Investments (Unaudited) -- continued
Stocks -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. Stocks -- continued
Oils -- continued
Coastal Corp. .................................. 85,300 $ 5,192,638
Conoco, Inc., "A" .............................. 59,000 1,298,000
Exxon Mobil Corp. .............................. 47,556 3,733,146
Transocean Sedco Forex, Inc. ................... 16,300 871,031
------------
$ 12,813,990
------------
Photographic Products
Eastman Kodak Co. .............................. 2,000 $ 119,000
------------
Printing and Publishing -- 2.0%
Gannett Co., Inc. .............................. 35,400 $ 2,117,362
New York Times Co. ............................. 41,800 1,651,100
Tribune Co. .................................... 27,900 976,500
------------
$ 4,744,962
------------
Railroads -- 0.3%
Burlington Northern Santa Fe Railway Co......... 33,200 $ 761,525
------------
Real Estate Investment Trusts -- 0.5%
Equity Residential Properties Trust ............ 25,500 $ 1,173,000
------------
Restaurants and Lodging -- 0.2%
McDonald's Corp. ............................... 11,600 $ 382,075
------------
Supermarkets -- 1.3%
Kroger Co.* .................................... 63,100 $ 1,392,144
Safeway, Inc.* ................................. 36,700 1,656,087
------------
$ 3,048,231
------------
Telecommunications -- 3.5%
Alltel Corp. ................................... 10,900 $ 675,119
AT&T Corp. ..................................... 13,201 417,482
Bell Atlantic Corp. ............................ 5,000 254,062
GTE Corp. ...................................... 67,300 4,189,425
SBC Communications, Inc. ....................... 58,844 2,545,003
Sprint Corp. ................................... 9,900 504,900
------------
$ 8,585,991
------------
Telecommunications and Cable -- 0.3%
Comcast Corp., "A"* ............................ 18,200 $ 737,100
------------
Utilities -- Electric -- 1.6%
CMS Energy Corp. ............................... 12,500 $ 276,563
CP&L Energy, Inc.* ............................. 32,500 1,037,969
Duke Energy Corp. .............................. 22,000 1,240,250
Peco Energy Co. ................................ 10,000 403,125
Pinnacle West Capital Corp. .................... 26,700 904,462
------------
$ 3,862,369
------------
Utilities -- Gas -- 2.4%
Columbia Energy Group .......................... 10,150 $ 666,094
El Paso Energy Corp. ........................... 9,000 458,437
National Fuel Gas Co. .......................... 37,500 1,828,125
Washington Gas Light Co. ....................... 5,100 122,719
Williams Cos., Inc. ............................ 63,100 2,630,481
------------
$ 5,705,856
------------
Total U.S. Stocks ......................................... $119,726,397
------------
Foreign Stocks -- 7.8%
France -- 0.1%
Axa (Insurance) ................................ 1,000 $ 157,509
------------
Japan -- 0.3%
Nippon Telegraph & Telephone Corp.,
ADR (Utilities -- Telephone) ................. 11,700 $ 799,988
------------
Netherlands -- 3.7%
Akzo Nobel N.V. (Chemicals) .................... 71,830 $ 3,051,317
ING Groep N.V. (Financial Services)* ........... 41,081 2,776,488
Royal Dutch Petroleum Co., ADR (Oils) .......... 52,700 3,244,344
------------
$ 9,072,149
------------
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Switzerland -- 0.6%
Nestle S.A.
(Food and Beverage Products) ................. 760 $ 1,521,584
------------
United Kingdom -- 3.1%
BP Amoco PLC, ADR (Oils) ....................... 73,870 $ 4,178,272
Diageo PLC
(Food and Beverage Products)* ................ 176,977 1,587,435
HSBC Holdings PLC
(Banks and Credit Cos.)* ..................... 104,600 1,195,337
SmithKline-Beecham PLC, ADR (Medical
and Health Products) ......................... 7,000 456,312
------------
$ 7,417,356
------------
Total Foreign Stocks ...................................... $ 18,968,586
------------
Total Stocks (Identified Cost, $128,221,683) .............. $138,694,983
------------
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Bonds -- 38.1%
U.S. Bonds -- 38.0%
Airlines -- 0.5%
Jet Equipment Trust, 9.41s, 2010## .......... $324 $ 347,516
Jet Equipment Trust, 8.64s, 2012## .......... 221 216,115
Jet Equipment Trust, 11.44s, 2014## ......... 300 331,920
Jet Equipment Trust, 10.69s, 2015## ......... 250 271,740
------------
$ 1,167,291
------------
Automotive -- 1.4%
DaimlerChrysler, 7.4s, 2005 ................. $725 $ 719,265
DaimlerChrysler, 7.75s, 2003 ................ 381 384,082
Ford Credit Auto Owner Trust, 6.2s, 2002 528 525,318
Ford Motor Co., 8.9s, 2032 .................. 385 421,021
Ford Motor Credit Co., 6.7s, 2004 ........... 195 188,928
Ford Motor Credit Co., 7.75s, 2007 .......... 406 402,533
Ford Motor Credit Co., 5.8s, 2009 ........... 142 123,538
Ford Motor Credit Co., 7.875s, 2010 ......... 435 434,922
General Motors Corp., 9.4s, 2021 ............ 187 213,096
------------
$ 3,412,703
------------
Banks and Credit Companies -- 1.6%
Beaver Valley Funding Corp. II, 9s, 2017 $752 $ 766,867
Capital One Financial Corp., 7.25s, 2003..... 400 390,554
Colonial Capital II, 8.92s, 2027 ............ 235 196,662
Midamerican Funding LLC, 5.85s, 2001 ........ 455 450,071
Midamerican Funding LLC, 6.927s, 2029........ 546 454,415
Midland Cogeneration Venture Corp.,
10.33s, 2002 .............................. 247 251,960
Midland Funding Corp., 10.33s, 2002 ......... 35 35,478
Midland Funding Corp. II, "A", 11.75s,
2005 ...................................... 540 604,487
Socgen Real Estate Co., 7.64s, 2049## ....... 170 155,586
State Street Corp., 7.65s, 2010 ............. 127 126,776
Washington Mutual Capital I, 8.375s,
2027 ...................................... 401 355,543
------------
$ 3,788,399
------------
Conglomerates -- 0.2%
Eaton Corp., 6.95s, 2004 .................... $190 $ 185,927
News America Holdings, Inc., 6.625s,
2008 ...................................... 34 31,174
News America Holdings, Inc., 6.703s,
2034 ...................................... 215 204,590
------------
$ 421,691
------------
Corporate Asset Backed -- 4.4%
American Airlines Pass-Through Trust,
6.855s, 2009 .............................. $257 $ 251,211
Banamex Credit Card Merchant Voucher,
6.25s, 2003## ............................. 366 357,647
</TABLE>
19-TRVA
<PAGE>
Portfolio of Investments (Unaudited) -- continued
Bonds -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Corporate Asset Backed -- continued
BCF LLC, 7.75s, 2026## ........................ $ 94 $ 50,843
Bear Stearns Commercial Mortgage
Securities, Inc., 6.8s, 2008 ................ 489 478,658
Beneficial Home Equity Loan Trust,
6.731s, 2037 ................................ 868 863,719
Chase Commercial Mortgage Securities
Corp., 6.39s, 2008 .......................... 369 344,877
Chase Commercial Mortgage Securities
Corp., 7.543s, 2009 ......................... 138 137,997
Commerce 2000, 6.93s, 2011 .................... 444 444,000
Commerce 2000, 6.95s, 2011 .................... 303 303,129
Contimortgage Home Equity, 6.13s, 2013 ........ 577 572,628
Continental Airlines Pass-Through Trust,
Inc., 9.5s, 2013 ............................ 133 135,073
Continental Airlines Pass-Through Trust,
Inc., 6.648s, 2017 .......................... 765 691,895
Continental Airlines Pass-Through Trust,
Inc., 6.545s, 2019 .......................... 114 102,611
Criimi Mae Commercial Mortgage Trust,
7s, 2011 .................................... 320 277,600
Criimi Mae Corp., 6.701s, 2008 ................ 190 170,228
CWMBS, Inc. Pass-Through Trust,
8s, 2030 .................................... 756 751,984
GS Mortgage Securities Corp. II,
6.06s, 2030 ................................. 755 721,774
Northwest Airlines Pass-Through Trust,
8.072s, 2019 ................................ 308 309,127
Northwest Airlines, Inc., 6.81s, 2020 ......... 135 122,372
Residential Accredit Loans, Inc.,
6.75s, 2028 ................................. 1,015 955,684
Residential Accredit Loans, Inc.,
7s, 2028 .................................... 500 471,071
Time Warner Pass-Through Asset Trust,
6.1s, 2001## ................................ 2,169 2,127,594
-----------
$10,641,722
-----------
Electrical Equipment -- 0.2%
American Tower Corp., 5s, 2010 ................ $ 480 $ 486,000
-----------
Entertainment -- 0.9%
Hearst Argyle Television, Inc., 7.5s, 2027..... $ 477 $ 402,393
Time Warner Entertainment Co. LP,
8.375s, 2033 ................................ 316 318,575
Time Warner, Inc., 10.15s, 2012 ............... 809 928,440
Time Warner, Inc., 9.15s, 2023 ................ 247 268,178
Time Warner, Inc., 6.625s, 2029 ............... 188 155,181
-----------
$ 2,072,767
-----------
Finance -- 0.1%
Countrywide Funding Corp., 6.25s, 2009......... $ 300 $ 261,732
-----------
Financial Institutions -- 2.7%
Associates Corp., 5.75s, 2003 ................. $ 593 $ 563,439
Associates Corp., 5.5s, 2004 .................. 1,238 1,149,520
AT&T Capital Corp., 6.25s, 2001 ............... 189 186,808
General Motors Acceptance Corp.,
6.75s, 2002 ................................. 544 534,747
General Motors Acceptance Corp.,
5.95s, 2003 ................................. 310 298,443
General Motors Acceptance Corp.,
7.625s, 2004 ................................ 866 867,827
Goldman Sachs Group LP, 5.9s, 2003 ............ 590 567,822
GS Escrow Corp., 6.75s, 2001 .................. 1,030 1,000,629
Salton Sea Funding Corp., 7.37s, 2005 ......... 305 292,724
Salton Sea Funding Corp., 7.84s, 2010 ......... 400 390,560
Salton Sea Funding Corp., 8.3s, 2011 .......... 157 157,546
Sunamerica Institutional, 5.75s, 2009 ......... 441 384,636
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Financial Institutions -- continued
United Companies Financial Corp.,
7.7s, 2004 .................................. $ 200 $ 69,500
-----------
$ 6,464,201
-----------
Financial Services -- 2.2%
AIG Sunamerica Global Financing II,
7.6s, 2005 .................................. $ 444 $ 448,635
AIG Sunamerica Global Financing I,
7.4s, 2003 .................................. 602 603,403
Deere (John) Capital Corp., 7s, 2002 .......... 273 271,206
General Electric Capital Corp., 7.5s,
2005 ........................................ 536 541,499
General Electric Capital Corp., 8.7s,
2007 ........................................ 110 118,315
General Electric Capital Corp., 8.75s,
2007 ........................................ 130 141,032
General Electric Capital Corp., 8.85s,
2007 ........................................ 199 216,514
General Electric Capital Corp., 7.375s,
2010 ........................................ 377 381,547
Morgan (JP) Commercial Mortgage
Finance Corp., 6.613s, 2030 ................. 175 166,285
Morgan (JP) Commercial Mortgage
Finance Corp., 6.903s, 2010 ................. 255 255,170
Morgan Stanley Dean Witter, 7.75s, 2005........ 291 293,011
Sprint Capital Corp., 6.5s, 2001 .............. 751 741,350
Sprint Capital Corp., 5.875s, 2004 ............ 994 933,137
Sprint Capital Corp., 6.9s, 2019 .............. 124 110,256
-----------
$ 5,221,360
-----------
Food and Beverage Products -- 0.9%
Nabisco, Inc., 6.375s, 2035 ................... $ 290 $ 259,286
Seagram (Joseph E) & Sons, Inc.,
5.79s, 2001 ................................. 573 564,949
Seagram (Joseph E) & Sons, Inc.,
6.4s, 2003 .................................. 985 942,783
Seagram (Joseph E) & Sons, Inc.,
7.5s, 2018 .................................. 488 466,811
-----------
$ 2,233,829
-----------
Forest and Paper Products -- 0.5%
Georgia-Pacific Corp., 9.95s, 2002 ............ $ 130 $ 134,597
Georgia-Pacific Corp., 9.875s, 2021 ........... 1,150 1,206,718
-----------
$ 1,341,315
-----------
Housing -- 0.1%
Residential Funding Mortgage Securities,
Inc., 7.66s, 2012 ........................... $ 150 $ 149,660
-----------
Insurance -- 0.8%
Aflac, Inc., 6.5s, 2009 ....................... $1,053 $ 952,934
Atlantic Mutual Insurance Co.,
8.15s, 2028 ................................. 620 488,690
Providian Capital I, 9.525s, 2027 ............. 755 592,388
-----------
$ 2,034,012
-----------
Oil Services -- 0.3%
Phillips Petroleum Co., 8.5s, 2005 ............ $ 279 $ 288,229
Ultramar Diamond Shamrock Corp.,
7.2s, 2017 .................................. 395 345,574
-----------
$ 633,803
-----------
Oils
Occidental Petroleum Corp., 6.4s, 2003 ........ $ 54 $ 52,152
-----------
Printing and Publishing
News America Holdings, Inc., 7.3s, 2028 $ 76 $ 64,887
-----------
</TABLE>
20-TRVA
<PAGE>
Portfolio of Investments (Unaudited) -- continued
Bonds -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Railroads -- 0.2%
Union Pacific Corp., 5.78s, 2001 ............... $ 195 $ 190,486
Union Pacific Corp., 6.34s, 2003 ............... 365 $ 349,969
------------
$ 540,455
------------
Retail -- 0.2%
Federated Department Stores, Inc.,
6.3s, 2009 ................................... $ 605 $ 531,614
------------
Telecommunications -- 0.6%
TCI Communications Financing III,
9.65s, 2027 .................................. $1,143 $ 1,262,787
Telecomunicaciones de Puerto Rico, Inc.,
6.65s, 2006 .................................. 270 255,499
------------
$ 1,518,286
------------
Telecommunications and Cable -- 0.1%
Belo Ah Corp., 7.75s, 2027 ..................... $ 226 $ 191,528
------------
U.S. Federal Agencies -- 6.7%
Federal Home Loan Bank -- 2.2%
Federal Home Loan Bank, 5.7s, 2009 ............. $4,000 $ 3,643,760
Federal Home Loan Bank, 6.5s, 2028 ............. 1,718 1,621,920
------------
$ 5,265,680
------------
Federal National Mortgage Association -- 4.5%
FNMA, 5.722s, 2009 ............................. $ 830 $ 744,147
FNMA, 6.5s, 2027 - 2028 ........................ 5,170 4,874,463
FNMA, 6.625s, 2009 ............................. 345 333,301
FNMA, 7s, 2029 - 2030 .......................... 3,483 3,362,551
FNMA, 7.25s, 2010 .............................. 1,679 1,695,908
------------
$ 11,010,370
------------
Total U.S. Federal Agencies ..................................... $ 16,276,050
------------
U.S. Government Guaranteed -- 8.4%
Government National Mortgage Association -- 3.1%
GNMA, 7s, 2028 - 2028 .......................... $2,160 $ 2,099,979
GNMA, 7.5s, 2023 - 2026 ........................ 2,689 2,672,853
GNMA, 8s, 2025 - 2030 .......................... 2,706 2,739,107
------------
$ 7,511,939
------------
U.S. Treasury Obligations -- 5.3%
U.S. Treasury Bonds, 6.125s, 2029 .............. $6,057 $ 6,117,570
U.S. Treasury Notes, 4.25s, 2010 ............... 2,544 2,580,405
U.S. Treasury Notes, 6.5s, 2010 ................ 3,916 4,050,006
------------
$ 12,747,981
------------
Total U.S. Government Guaranteed ................................ $ 20,259,920
------------
Utilities -- Electric -- 3.9%
CalEnergy Co., Inc., 7.23s, 2005 ............... $ 5 $ 4,862
CE Generation LLC, 7.416s, 2018 ................ 183 163,503
Cleveland Electric Illuminating Co.,
7.67s, 2004 .................................. 717 706,496
Cleveland Electric Illuminating Co.,
7.88s, 2017 .................................. 427 401,811
Cleveland Electric Illuminating Co.,
9s, 2023 ..................................... 321 324,547
CMS Energy Corp., 8.375s, 2003 ................. 210 203,016
CMS Energy Corp., 8s, 2011 ..................... 330 324,957
Commonwealth Edison Company,
8.5s, 2022 ................................... 571 568,054
Connecticut Light & Power Co.,
7.875s, 2001 ................................. 56 56,180
Connecticut Light & Power Co.,
8.59s, 2003 .................................. 600 595,824
Connecticut Light & Power Co.,
7.875s, 2024 ................................. 500 499,840
Entergy Mississippi, Inc., 6.2s, 2004 .......... 256 242,798
GGIB Funding Corp., 7.43s, 2011 ................ 163 155,138
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Utilities -- Electric -- continued
Gulf States Utilities Co., 8.25s, 2004 ......... $ 128 $ 129,123
Illinois Power Special Purpose Trust,
5.26s, 2003 .................................. 191 188,343
Niagara Mohawk Power Corp.,
7.25s, 2002 .................................. 333 329,491
Niagara Mohawk Power Corp.,
7.375s, 2003 ................................. 78 76,910
Niagara Mohawk Power Corp.,
7.75s, 2006 .................................. 782 779,678
Niagara Mohawk Power Corp.,
8.77s, 2018 .................................. 590 607,735
Niagara Mohawk Power Corp.,
8.5s, 2023 ................................... 285 283,512
North Atlantic Energy, 9.05s, 2002 ............. 112 112,820
Northeast Utilities, 8.58s, 2006 ............... 320 322,005
NRG Energy South Central,
8.962s, 2016 ................................. 279 279,977
NRG Energy, Inc., 1s, 2005 ..................... 190 190,259
PP&L, Inc., 6.125s, 2001 ....................... 500 494,820
Texas Utilities Co., 5.94s, 2001 ............... 218 213,304
Toledo Edison Co., 7.875s, 2004 ................ 500 488,440
TXU Eastern Funding Co., 6.15s, 2002 ........... 165 159,870
Utilicorp United, Inc., 7s, 2004 ............... 152 145,180
Waterford 3 Funding Entergy Corp.,
8.09s, 2017 .................................. 519 493,022
------------
$ 9,541,515
------------
Utilities -- Gas -- 0.9%
Coastal Corp., 6.2s, 2004 ...................... $ 699 $ 666,539
Coastal Corp., 7.75s, 2010 ..................... 571 567,157
Enron Corp., 7.875s, 2003 ...................... 199 200,208
Tennessee Gas Pipeline Co., 7.625s,
2037 ......................................... 260 242,725
Texas Gas Transmission Corp., 7.25s,
2027 ......................................... 400 367,648
Williams Gas Pipelines Central, Inc.,
7.375s, 2006 ................................. 163 158,684
------------
$ 2,202,961
------------
Utilities -- Telephone -- 0.2%
U.S. West Communications, Inc.,
7.625s, 2003 ................................. $ 429 $ 427,859
------------
Total U.S. Bonds ................................................ $ 91,937,712
------------
Foreign Bonds -- 0.1%
Canada -- 0.1%
AT&T Canada, Inc., 0s to 2003, 9.95s to
2008, 1s, 2008 (Telecommunications) .......... $ 94 $ 76,245
Gulf Canada Resources Ltd., 9.25s,
2004 (Oils) .................................. 260 261,090
------------
$ 337,335
------------
Total Foreign Bonds ............................................. $ 337,335
------------
Total Bonds (Identified Cost, $94,861,855) ...................... $ 92,275,047
------------
</TABLE>
21-TRVA
<PAGE>
Portfolio of Investments (Unaudited) -- continued
Convertible Preferred Stock -- 1.5%
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Containers -- 0.1%
Owens-Illinois, Inc., 4.75% .................... 8,200 $ 182,450
----------
Insurance -- 0.4
Lincoln National Corp., 7.75% .................. 53,900 $1,091,475
----------
Utilities -- Electric -- 0.7%
CMS Energy Corp., 8.75% ........................ 27,100 $ 758,800
NiSource, Inc., 7.75% .......................... 10,000 395,625
TXU Corp., 9.25% ............................... 13,900 540,362
----------
$1,694,787
----------
Utilities -- Gas -- 0.3%
El Paso Energy Capital Trust I, 4.75% 12,000 $ 772,500
----------
Total Convertible Preferred Stock
(Identified Cost, $4,506,100) ................................. $3,741,212
----------
Convertible Bond -- 0.7%
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
(000 Omitted)
<S> <C> <C>
Business Machines -- 0.1%
Xerox Corp., 0s, 2018 .......................... $ 520 $ 270,400
----------
Conglomerates -- 0.6%
Loews Corp., 3.125s, 2007 ...................... $1,660 $1,381,950
----------
Total Convertible Bond
(Identified Cost, $1,737,864) ................................. $1,652,350
----------
Shares
Rights -- 0.2%
CVS Corp., (Identified Cost, $588,454).......... 8,000 $ 566,500
----------
</TABLE>
Short Term Obligations -- 1.4%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Federal Home Loan Bank, due 7/03/00 ......... $ 3 $ 2,999
General Electric Capital Corp.,
due 7/03/00 ............................... 3,400 3,398,687
------------
Total Short-Term Obligations, at Amortized Cost ................ $ 3,401,686
------------
Total Investments
(Identified Cost, $233,317,642 ) .............................. $240,331,778
Other Assets,
Less Liabilities -- 0.8% 1,874,158
------------
Net Assets -- 100.0% ........................................... $242,205,936
============
</TABLE>
See portfolio footnotes and notes to financial statements.
Portfolio Footnotes:
* Non-income producing security.
** Non-income producing security-in default.
# Payment-in-kind security.
## SEC Rule 144A restriction.
+ Restricted security.
++ Security valued by or at the direction of Trustees.
Abbreviations have been used throughout this report to indicate amounts shown
in currencies other than the U.S. dollar. A list of abbreviations is shown
below.
<TABLE>
<S> <C> <C> <C>
AUD = Australian Dollars GBP = British Pounds
BRL = Brazilian Real GRD = Greek Drachma
CAD = Canadian Dollars JPY = Japanese Yen
DKK = Danish Kroner NZD = New Zealand Dollars
EUR = Euro SEK = Swedish Krona
VEB = Venezuelan Bolivar
</TABLE>
22-TRVA
<PAGE>
Statements of Assets and Liabilities (Unaudited) -- June 30, 2000
(000 Omitted)
<TABLE>
<CAPTION>
Capital Global Government
Appreciation Governments Securities
Variable Variable Variable
Account Account Account
-------------- ------------- --------------
<S> <C> <C> <C>
Assets:
Investments --
Investments cost ................................... $692,868 $12,873 $140,481
Unrealized appreciation (depreciation) ............. 158,879 (129) (2,055)
-------- -------- ---------
Total investments, at value ...................... $851,747 $12,744 $138,426
Cash ................................................ -- 1 --
Net receivable for forward foreign currency
exchange contracts to purchase ..................... -- 11 --
Receivable for units sold ........................... 489 -- 58
Receivable for investments sold ..................... 18,990 96 6
Interest and dividends receivable ................... 202 229 1,401
Receivable from sponsor ............................. -- -- --
Other assets ........................................ 8 -- 2
-------- -------- ---------
Total assets ..................................... $871,436 $13,081 $139,893
-------- -------- ---------
Liabilities:
Cash overdraft ...................................... $ -- $ -- $ --
Payable to Custodian ................................ 3,212 -- --
Net payable for forward foreign currency exchange
contracts closed or subject to master netting
agreements ......................................... -- 1 --
Net payable for forward foreign currency exchange
contracts to sell .................................. -- 14 --
Payable for investments purchased ................... 5,586 410 --
Payable for units surrendered ....................... 934 1 186
Written options outstanding, at value
(premiums received $35) ............................ -- 20 --
Payable to affiliates --
Investment adviser ................................. 16 -- 2
Sponsor ............................................ 1,482 6 297
Accrued expenses and other liabilities .............. 112 24 44
-------- ------- --------
Total liabilities ................................ $ 11,342 $ 476 $ 529
-------- ------- --------
Net assets ....................................... $860,094 $12,605 $139,364
======== ======= ========
<CAPTION>
High Managed Money Total
Yield Sectors Market Return
Variable Variable Variable Variable
Account Account Account Account
-------------- ------------- ------------ -----------
<S> <C> <C> <C> <C>
Assets:
Investments --
Investments cost ................................... $ 157,081 $199,648 $97,166 $233,318
Unrealized appreciation (depreciation) ............. (13,855) 18,387 -- 7,014
--------- -------- ------- --------
Total investments, at value ...................... $ 143,226 $218,035 $97,166 $240,332
Cash ................................................ -- 3 7 75
Net receivable for forward foreign currency
exchange contracts to purchase ..................... -- -- -- --
Receivable for units sold ........................... -- -- 94 54
Receivable for investments sold ..................... 650 9,321 -- 1,516
Interest and dividends receivable ................... 2,916 56 -- 1,726
Receivable from sponsor ............................. 62 -- -- 608
Other assets ........................................ 3 1 29 6
--------- -------- ------- --------
Total assets ..................................... $ 146,857 $227,416 $97,296 $244,317
--------- -------- ------- --------
Liabilities:
Cash overdraft ...................................... $ -- $ 13 $ -- $ 7
Payable to Custodian ................................ 500 -- -- --
Net payable for forward foreign currency exchange
contracts closed or subject to master netting
agreements ......................................... -- -- -- --
Net payable for forward foreign currency exchange
contracts to sell .................................. -- -- -- --
Payable for investments purchased ................... 1,490 10,769 -- 1,956
Payable for units surrendered ....................... 35 94 122 91
Written options outstanding, at value
(premiums received $35) ............................ -- -- -- --
Payable to affiliates --
Investment adviser ................................. 3 4 1 5
Sponsor ............................................ -- 190 411 --
Accrued expenses and other liabilities .............. 55 56 31 52
--------- -------- ------- --------
Total liabilities ................................ $ 2,083 $ 11,126 $ 565 $ 2,111
--------- -------- ------- --------
Net assets ....................................... $ 144,774 $216,290 $96,731 $242,206
========= ======== ======= ========
</TABLE>
See notes to financial statements.
23
<PAGE>
Statements of Assets and Liabilities (Unaudited) -- June 30, 2000 -- continued
(000 Omitted except for unit values)
<TABLE>
<CAPTION>
Capital Global
Appreciation Governments
Unit Variable Variable
Unit Value Account Account
------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Net assets applicable to contract
owners:
Capital Appreciation
Variable Account --
Compass 2 ...................... 6,052 $ 97.4495 $589,659
Compass 3 ...................... 1,554 64.5423 100,281
Compass 3 - Level 2 ............ 6,005 26.6868 160,242
Global Governments
Variable Account --
Compass 2 ...................... 169 $ 19.1565 $ 3,232
Compass 3 ...................... 139 18.8040 2,611
Compass 3 - Level 2 ............ 607 10.9567 6,656
Government Securities
Variable Account --
Compass 2 ...................... 3,650 $ 29.4919
Compass 3 ...................... 509 20.6931
Compass 3 - Level 2 ............ 1,548 12.0376
High Yield
Variable Account --
Compass 2 ...................... 2,914 $ 33.5810
Compass 3 ...................... 396 24.7843
Compass 3 - Level 2 ............ 2,634 13.1768
Managed Sectors
Variable Account --
Compass 2 ...................... 737 $ 85.6214
Compass 3 ...................... 679 84.6420
Compass 3 - Level 2 ............ 3,485 27.2488
Money Market
Variable Account --
Compass 2 ...................... 3,576 $ 19.3939
Compass 3 ...................... 496 15.9575
Compass 3 - Level 2 ............ 1,571 11.8823
Total Return
Variable Account --
Compass 2 ...................... 2,413 $ 34.4289
Compass 3 ...................... 1,608 33.7971
Compass 3 - Level 2 ............ 6,269 16.2315
Net assets applicable to owners of deferred contracts 850,182 12,499
Reserve for variable annuities --
Compass 2 Contracts ............................... 8,846 63
Compass 3 Contracts ............................... 85 37
Compass 3 - Level 2 Contracts ..................... 981 6
-------- -------
Net assets ..................................... $860,094 $12,605
======== =======
<CAPTION>
Government High Managed Money Total
Securities Yield Sectors Market Return
Variable Variable Variable Variable Variable
Account Account Account Account Account
------------ ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Net assets applicable to contract
owners:
Capital Appreciation
Variable Account --
Compass 2 ......................
Compass 3 ......................
Compass 3 - Level 2 ............
Global Governments
Variable Account --
Compass 2 ......................
Compass 3 ......................
Compass 3 - Level 2 ............
Government Securities
Variable Account --
Compass 2 ...................... $107,628
Compass 3 ...................... 10,527
Compass 3 - Level 2 ............ 18,631
High Yield
Variable Account --
Compass 2 ...................... $ 97,833
Compass 3 ...................... 9,808
Compass 3 - Level 2 ............ 34,710
Managed Sectors
Variable Account --
Compass 2 ...................... $ 63,111
Compass 3 ...................... 57,512
Compass 3 - Level 2 ............ 94,965
Money Market
Variable Account --
Compass 2 ...................... $69,295
Compass 3 ...................... 7,895
Compass 3 - Level 2 ............ 18,655
Total Return
Variable Account --
Compass 2 ...................... $ 83,053
Compass 3 ...................... 54,316
Compass 3 - Level 2 ............ 101,768
--------
Net assets applicable to owners 136,786 142,351 215,588 95,845 239,137
of deferred contracts
Reserve for variable annuities --
Compass 2 Contracts ......... 2,400 2,367 368 819 2,610
Compass 3 Contracts ......... 68 4 -- -- 57
Compass 3 - Level 2 Contracts . 110 52 334 67 402
-------- -------- -------- ------- --------
Net assets ............... $139,364 $144,774 $216,290 $96,731 $242,206
======== ======== ======== ======= ========
</TABLE>
See notes to financial statements.
24
<PAGE>
Statements of Operations (Unaudited) -- Six Months Ended June 30, 2000
(000 Omitted)
<TABLE>
<CAPTION>
Capital Global Government
Appreciation Governments Securities
Variable Variable Variable
Account Account Account
-------------- ------------- ------------
<S> <C> <C> <C>
Net investment income (loss):
Income --
Interest ........................................................ $ 392 $ 398 $5,412
Dividends ....................................................... 4,639 -- --
---------- ------ ------
Total investment income ........................................ $ 5,031 $ 398 $5,412
---------- ------ ------
Expenses --
Mortality and expense risk charges .............................. $ 5,339 $ 82 $ 931
Management fee .................................................. 2,979 50 409
Boards of Managers fees ......................................... 8 -- 2
Distribution fee ................................................ 77 2 9
Administrative fee .............................................. 69 1 12
Custodian fee ................................................... 172 8 25
Printing ........................................................ 23 1 10
Auditing fees ................................................... 15 19 17
Legal fees ...................................................... 1 -- --
Miscellaneous ................................................... 52 -- --
---------- ------ ------
Total expenses ................................................. $ 8,735 $ 163 $1,415
Fees paid indirectly ............................................ (61) -- (5)
---------- ------ --------
Net expenses ................................................... $ 8,674 $ 163 $1,410
---------- ------ -------
Net investment income (loss) .................................. $ (3,643) $ 235 $4,002
---------- ------ -------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -- ..................
Investment transactions ......................................... $ 198,263 $ (830) $(666)
Written option transactions ..................................... -- 93 --
Foreign currency transactions ................................... 27 (207) --
---------- ------ -------
Net realized gain (loss) on investments and foreign
currency transactions ......................................... $ 198,290 $ (944) $(666)
---------- ------ -------
Change in unrealized appreciation (depreciation):
Investments ..................................................... $ (149,198) $ 521 $1,730
Written options ................................................. -- (35) --
Translation of assets and liabilities in foreign currencies ..... -- (30) --
---------- ------ -------
Net unrealized gain (loss) on investments and foreign
currency translation .......................................... $ (149,198) $ 456 $1,730
---------- ------ -------
Net realized and unrealized gain (loss) on
investments and foreign currency ............................. $ 49,092 $ (488) $1,064
---------- ------ -------
Increase (decrease) in net assets from operations $ 45,449 $ (253) $5,066
========== ====== =======
<CAPTION>
High Managed Money Total
Yield Sectors Market Return
Variable Variable Variable Variable
Account Account Account Account
-------------- --------------- ------------ --------------
<S> <C> <C> <C> <C>
Net investment income (loss):
Income --
Interest ........................................................ $ 6,845 $ 565 $3,725 $ 3,642
Dividends ....................................................... 66 265 -- 1,620
------- -------- ------ -------
Total investment income ........................................ $ 6,911 $ 830 $3,725 $ 5,262
------- -------- ------ -------
Expenses --
Mortality and expense risk charges .............................. $ 799 $ 1,437 $ 780 $ 1,529
Management fee .................................................. 477 874 311 936
Boards of Managers fees ......................................... 1 2 1 3
Distribution fee ................................................ 7 50 8 44
Administrative fee .............................................. 9 19 10 20
Custodian fee ................................................... 25 61 24 50
Printing ........................................................ 12 11 8 9
Auditing fees ................................................... 19 14 10 19
Legal fees ...................................................... 1 -- -- --
Miscellaneous ................................................... 17 15 4 1
------- -------- ------ -------
Total expenses ................................................. $ 1,367 $ 2,483 $1,156 $ 2,611
Fees paid indirectly ............................................ (4) (19) (3) (1)
--------- -------- ------ -------
Net expenses ................................................... $ 1,363 $ 2,464 $1,153 $ 2,610
--------- -------- ------ -------
Net investment income (loss) .................................. $ 5,548 $ (1,634) $2,572 $ 2,652
--------- -------- ------ -------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -- ..................
Investment transactions ......................................... $ (388) $ 52,412 $ -- $ 4,535
Written option transactions ..................................... -- -- -- --
Foreign currency transactions ................................... 50 12 -- 3
--------- -------- ------ -------
Net realized gain (loss) on investments and foreign
currency transactions ......................................... $ (338) $ 52,424 $ -- $ 4,538
--------- -------- ------ -------
Change in unrealized appreciation (depreciation):
Investments ..................................................... $(5,102) $(69,968) $ -- $(3,207)
Written options ................................................. -- -- -- --
Translation of assets and liabilities in foreign currencies ..... (5) (5) -- 3
---------- ----------- ------ -------
Net unrealized gain (loss) on investments and foreign
currency translation .......................................... $(5,107) $(69,973) $ -- $(3,204)
--------- ---------- ------ -------
Net realized and unrealized gain (loss) on
investments and foreign currency ............................. $(5,445) $(17,549) $ -- $ 1,334
--------- ---------- ------ -------
Increase (decrease) in net assets from operations $ 103 $(19,183) $2,572 $ 3,986
========= ========== ====== =======
</TABLE>
See notes to financial statements.
25
<PAGE>
Statements of Changes in Net Assets
(000 Omitted)
<TABLE>
<CAPTION>
Capital Appreciation
Variable Account
----------------------------
Six Months
Ended
June 30, Year Ended
2000 December 31,
(Unaudited) 1999
------------- --------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations:
Net investment income (loss) ........................... $ (3,643) $ (10,931)
Net realized gain (loss) on investments
and foreign currency transactions ..................... 198,290 130,239
Net unrealized gain (loss) on investments
and foreign currency translation ...................... (149,198) 87,329
---------- ---------
Increase (decrease) in net assets from operations. $ 45,449 $ 206,637
---------- ---------
Participant transactions:
Accumulation activity:
Purchase payments received ............................. $ 10,201 $ 19,435
Net transfers between variable and fixed
accumulation accounts ................................. 4,229 (23,279)
Withdrawals, surrenders, annuitizations and
contract charges ...................................... (53,265) (92,454)
---------- ---------
Net accumulation activity ............................. $ (38,835) $ (96,298)
---------- ---------
Annuitization activity:
Annuitizations ......................................... $ 1,075 $ 766
Annuity payments and contract charges .................. (685) (1,105)
Net transfers among accounts for annuity reserves 28 --
Adjustments to annuity reserves ........................ (129) (384)
---------- ---------
Net annuitization activity ............................ $ 289 $ (723)
---------- ---------
Decrease in net assets from participant
transactions .......................................... $ (38,546) $ (97,021)
---------- ---------
Total increase (decrease) in net assets ............... $ 6,903 $ 109,616
Net assets:
At beginning of period .................................. 853,191 743,575
---------- ---------
At end of period ........................................ $ 860,094 $ 853,191
========== =========
<CAPTION>
Global Governments Government Securities
Variable Account Variable Account
---------------------------- ---------------------------
Six Months Six Months
Ended Ended
June 30, Year Ended June 30, Year Ended
2000 December 31, 2000 December 31,
(Unaudited) 1999 (Unaudited) 1999
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
From operations:
Net investment income (loss) ........................... $ 235 $ 528 $ 4,002 $ 8,695
Net realized gain (loss) on investments
and foreign currency transactions ..................... (944) (239) (666) (1,424)
Net unrealized gain (loss) on investments
and foreign currency translation ...................... 456 (1,531) 1,730 (12,570)
------- -------- --------- ---------
Increase (decrease) in net assets from operations. $ (253) $ (1,242) $ 5,066 $ (5,299)
------- -------- --------- ---------
Participant transactions:
Accumulation activity:
Purchase payments received ............................. $ 325 $ 858 $ 1,348 $ 3,260
Net transfers between variable and fixed
accumulation accounts ................................. (621) (2,176) (9,958) 5,805
Withdrawals, surrenders, annuitizations and
contract charges ...................................... (1,783) (2,986) (13,257) (26,185)
------- -------- --------- ---------
Net accumulation activity ............................. $(2,079) $ (4,304) $ (21,867) $ (17,120)
------- -------- --------- ---------
Annuitization activity:
Annuitizations ......................................... $ 11 $ 39 $ 105 $ 278
Annuity payments and contract charges .................. (9) (50) (215) (482)
Net transfers among accounts for annuity reserves 2 (51) 280 --
Adjustments to annuity reserves ........................ (11) 31 (124) 29
------- -------- --------- ---------
Net annuitization activity ............................ $ (7 $ (31) $ 46 $ (175)
------- -------- --------- ---------
Decrease in net assets from participant
transactions .......................................... $(2,086 $ (4,335) $ (21,821) $ (17,295)
------- -------- --------- ---------
Total increase (decrease) in net assets ............... $(2,339 $ (5,577) $ (16,755) $ (22,594)
Net assets:
At beginning of period .................................. 14,944 20,521 156,119 178,713
------- -------- --------- ---------
At end of period ........................................ $12,605 $ 14,944 $ 139,364 $ 156,119
======= ======== ========= =========
</TABLE>
See notes to financial statements.
26
<PAGE>
Statements of Changes in Net Assets -- continued
(000 Omitted)
<TABLE>
<CAPTION>
High Yield Managed Sectors
Variable Account Variable Account
------------------------------ -----------------------------
Six Months Six Months
Ended Ended
June 30, Year Ended June 30, Year Ended
2000 December 31, 2000 December 31,
(Unaudited) 1999 (Unaudited) 1999
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
From operations:
Net investment income (loss) ........................... $ 5,548 $ 12,068 $ (1,634) $ (1,908)
Net realized gain (loss) on investments and
foreign currency transactions ......................... (338) (3,849) 52,424 42,843
Net unrealized gain (loss) on investments
and foreign currency translation ...................... (5,107) 1,096 (69,973) 63,070
--------- --------- --------- ---------
Increase (decrease) in net assets from operations. $ 103 $ 9,315 $ (19,183) $ 104,005
--------- --------- --------- ---------
Participant transactions:
Accumulation activity:
Purchase payments received ............................. $ 1,527 $ 2,632 $ 4,731 $ 7,734
Net transfers between variable and fixed
accumulation accounts ................................. 24,343 (7,896) 16,458 13,940
Withdrawals, surrenders, annuitizations and
contract charges ...................................... (10,484) (22,130) (14,373) (22,020)
--------- --------- --------- ---------
Net accumulation activity ............................. $ 15,386 $ (27,394) $ 6,816 $ (346)
--------- --------- --------- ---------
Annuitization activity:
Annuitizations ......................................... $ 85 $ 201 $ 24 $ 125
Annuity payments and contract charges .................. (202) (413) (89) (157)
Net transfers among accounts for annuity reserves (53) 53 75 --
Adjustments to annuity reserves ........................ 96 (112) (61) (137)
--------- --------- --------- ---------
Net annuitization activity ............................ $ (74) $ (271) $ (51) $ (169)
--------- --------- --------- ---------
Increase (decrease) in net assets from
participant transactions .............................. $ 15,312 $ (27,665) $ 6,765 $ (515)
--------- --------- --------- ---------
Total increase (decrease) in net assets ............... $ 15,415 $ (18,350) $ (12,418) $ 103,490
Net assets:
At beginning of period .................................. 129,359 147,709 228,708 125,218
--------- --------- --------- ---------
At end of period ........................................ $ 144,774 $ 129,359 $ 216,290 $ 228,708
========= ========= ========= =========
</TABLE>
See notes to financial statements.
27
<PAGE>
Statements of Changes in Net Assets -- continued
(000 Omitted)
<TABLE>
<CAPTION>
Money Market Total Return
Variable Account Variable Account
---------------------------- -----------------------------
Six Months Six Months
Ended Ended
June 30, Year Ended June 30, Year Ended
2000 December 31, 2000 December 31,
(Unaudited) 1999 (Unaudited) 1999
------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
From operations:
Net investment income ............................................. $ 2,572 $ 3,947 $ 2,652 $ 5,739
Net realized gain on investments and foreign currency
transactions ..................................................... -- -- 4,538 20,432
Net unrealized loss on investments and foreign currency
translation ...................................................... -- -- (3,204) (21,745)
--------- --------- --------- --------
Increase in net assets from operations ........................... $ 2,572 $ 3,947 $ 3,986 $ 4,426
--------- --------- --------- --------
Participant transactions:
Accumulation activity:
Purchase payments received ........................................ $ 2,482 $ 3,675 $ 5,468 $ 12,582
Net transfers between variable and fixed accumulation accounts .... (17,484) 19,742 (18,470) (7,811)
Withdrawals, surrenders, annuitizations and contract charges ...... (21,426) (29,454) (27,849) (50,581)
--------- --------- --------- --------
Net accumulation activity ........................................ $ (36,428) $ (6,037) $ (40,851) $(45,810)
--------- --------- --------- --------
Annuitization activity:
Annuitizations .................................................... $ 19 $ 326 $ 34 $ 364
Annuity payments and contract charges ............................. (91) (274) (199) (558)
Net transfers among accounts for annuity reserves ................. (315) 353 (16) (1)
Adjustments to annuity reserves ................................... (174) (61) 47 (21)
--------- --------- --------- --------
Net annuitization activity ....................................... $ (561) $ 344 $ (134) $ (216)
--------- --------- --------- --------
Decrease in net assets from participant transactions .............. $ (36,989) $ (5,693) $ (40,985) $(46,026)
--------- --------- --------- --------
Total decrease in net assets ..................................... $ (34,417) $ (1,746) $ (36,999) $(41,600)
Net assets:
At beginning of period ............................................. 131,148 132,894 279,205 320,805
--------- --------- --------- --------
At end of period ................................................... $ 96,731 $ 131,148 $ 242,206 $279,205
========= ========= ========= ========
</TABLE>
See notes to financial statements.
28
<PAGE>
Per Unit and Other Data
<TABLE>
<CAPTION>
Capital Appreciation Variable Account
-------------------------------------
Compass 2
-----------------
Six Months Year Ended
Ended December 31,
June 30, 2000 -----------------
(Unaudited) 1999
-------------------- ----------------
<S> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 92.2421 $ 70.4257
---------- ---------
Investment income ........................................ $ 0.5645 $ 0.4013
Expenses ................................................. 0.9702 1.5185
---------- ---------
Net investment loss ..................................... $ (0.4057) $ (1.1172)
Net realized and unrealized gain on investments
and foreign currency transactions ....................... 5.6131 22.9336
---------- ---------
Net increase in unit value ............................... $ 5.2074 $ 21.8164
---------- ---------
Unit value:
Net asset value -- end of period ......................... $ 97.4495 $ 92.2421
========== =========
Ratios (to average net assets):
Expenses+## .............................................. 0.78%++ 0.76%
Net investment loss ...................................... (0.43)%++ (1.51)%
Portfolio turnover ........................................ 71% 85%
Number of units outstanding at end of period (000 Omitted) 6,052 6,403
<CAPTION>
Capital Appreciation Variable Account
-------------------------------------------------------------------
Compass 2
-------------------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------------------
1998 1997 1996 1995
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 55.3902 $ 45.4107 $ 37.7151 $ 28.0107
--------- --------- --------- ---------
Investment income ........................................ $ 0.3113 $ 0.3241 $ 0.2861 $ 0.3624
Expenses ................................................. 1.2754 1.0741 0.8695 0.6989
--------- --------- --------- ---------
Net investment loss ..................................... $ (0.9641) $ (0.7500) $ (0.5834) $ (0.3365)
Net realized and unrealized gain on investments
and foreign currency transactions ....................... 15.9996 10.7295 8.2790 10.0409
--------- --------- --------- ---------
Net increase in unit value ............................... $ 15.0355 $ 9.9795 $ 7.6956 $ 9.7044
--------- --------- --------- ---------
Unit value:
Net asset value -- end of period ......................... $ 70.4257 $ 55.3902 $ 45.4107 $ 37.7151
========= ========= ========= =========
Ratios (to average net assets):
Expenses+## .............................................. 0.77% 0.77% 0.78% 0.80%
Net investment loss ...................................... (1.55)% (1.45)% (1.41)% (1.02)%
Portfolio turnover ........................................ 78% 60% 66% 96%
Number of units outstanding at end of period (000 Omitted) 7,447 8,173 9,004 10,014
</TABLE>
<TABLE>
<CAPTION>
Capital Appreciation Variable Account
-------------------------------------
Compass 3
-----------------
Six Months Year Ended
Ended December 31,
June 30, 2000 -----------------
(Unaudited) 1999
-------------------- ----------------
<S> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 61.1235 $ 46.7129
---------- ---------
Investment income ........................................ $ 0.3534 $ 0.2614
Expenses ................................................. 0.6636 1.0418
---------- ---------
Net investment loss ..................................... $ (0.3102) $ (0.7804)
Net realized and unrealized gain on investments and
foreign currency transactions ........................... 3.7290 15.1910
---------- ---------
Net increase in unit value ............................... $ 3.4188 $ 14.4106
---------- ---------
Unit value:
Net asset value -- end of period ......................... $ 64.5423 $ 61.1235
========== =========
Ratios (to average net assets):
Expenses+## .............................................. 0.78%++ 0.76%
Net investment loss ...................................... (0.43)%++ (1.51)%
Portfolio turnover ........................................ 71% 85%
Number of units outstanding at end of period (000 Omitted) 1,554 1,824
<CAPTION>
Capital Appreciation Variable Account
-------------------------------------------------------------------
Compass 3
-------------------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------------------
1998 1997 1996 1995
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 36.7764 $ 30.1803 $ 25.0907 $ 18.6531
--------- --------- --------- ---------
Investment income ........................................ $ 0.2031 $ 0.2107 $ 0.1893 $ 0.2402
Expenses ................................................. 0.8753 0.7383 0.6053 0.4847
--------- --------- --------- ---------
Net investment loss ..................................... $ (0.6722) $ (0.5276) $ (0.4160) $ (0.2445)
Net realized and unrealized gain on investments and
foreign currency transactions ........................... 10.6087 7.1237 5.5056 6.6821
--------- --------- --------- ---------
Net increase in unit value ............................... $ 9.9365 $ 6.5961 $ 5.0896 $ 6.4376
--------- --------- --------- ---------
Unit value:
Net asset value -- end of period ......................... $ 46.7129 $ 36.7764 $ 30.1803 $ 25.0907
========= ========= ========= =========
Ratios (to average net assets):
Expenses+## .............................................. 0.77% 0.77% 0.78% 0.80%
Net investment loss ...................................... (1.55)% (1.45)% (1.41)% (1.02)%
Portfolio turnover ........................................ 78% 60% 66% 96%
Number of units outstanding at end of period (000 Omitted) 2,452 2,953 3,721 4,272
</TABLE>
<TABLE>
<CAPTION>
Capital Appreciation Variable Account
-------------------------------------
Compass
3 - Level 2
----------------
Six Months Year Ended
Ended 1999
June 30, 2000 ----------------
(Unaudited) December 31,
-------------------- ----------------
<S> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 25.2546 $ 19.2720
---------- ---------
Investment income ........................................ $ 0.1580 $ 0.1090
Expenses ................................................. 0.2599 0.4089
---------- ---------
Net investment loss ..................................... $ (0.1019) $ (0.2999)
Net realized and unrealized gain on investments and
foreign currency transactions ........................... 1.5341 6.2825
---------- ---------
Net increase in unit value ............................... $ 1.4322 $ 5.9826
---------- ---------
Unit value:
Net asset value -- end of period ......................... $ 26.6868 $ 25.2546
========== =========
Ratios (to average net assets):
Expenses+## .............................................. 0.78%++ 0.76%
Net investment loss ...................................... (0.43)%++ (1.51)%
Portfolio turnover ........................................ 71% 85%
Number of units outstanding at end of period (000 Omitted) 6,005 5,632
<CAPTION>
Capital Appreciation Variable Account
---------------------------------------------------
Compass 3 - Level 2
--------------------------------------------------
Year Ended December 31,
--------------------------------------------------
1998 1997 1996
---------------- ---------------- ----------------
<S> <C> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 15.1500 $ 12.4143 $ 10.3053
--------- --------- ---------
Investment income ........................................ $ 0.0850 $ 0.0914 $ 0.0790
Expenses ................................................. 0.3421 0.2935 0.2370
--------- --------- ---------
Net investment loss ..................................... $ (0.2571) $ (0.2021) $ (0.1580)
Net realized and unrealized gain on investments and
foreign currency transactions ........................... 4.3791 2.9378 2.2670
--------- --------- ---------
Net increase in unit value ............................... $ 4.1220 $ 2.7357 $ 2.1090
--------- --------- ---------
Unit value:
Net asset value -- end of period ......................... $ 19.2720 $ 15.1500 $ 12.4143
========= ========= =========
Ratios (to average net assets):
Expenses+## .............................................. 0.77% 0.77% 0.78%
Net investment loss ...................................... (1.55)% (1.45)% (1.41)%
Portfolio turnover ........................................ 78% 60% 66%
Number of units outstanding at end of period (000 Omitted) 5,055 3,971 2,494
<CAPTION>
Capital Appreciation Variable Account
---------------------------------------------
Period Ended
December 31,
1995#
--------------------
<S> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 10.0000
----------
Investment income ........................................ $ 0.0196
Expenses ................................................. 0.0517
----------
Net investment loss ..................................... $ (0.0321)
Net realized and unrealized gain on investments and
foreign currency transactions ........................... 0.3374
----------
Net increase in unit value ............................... $ 0.3053
----------
Unit value:
Net asset value -- end of period ......................... $ 10.3053
==========
Ratios (to average net assets):
Expenses+## .............................................. 0.80%++
Net investment loss ...................................... (1.02)%++
Portfolio turnover ........................................ 96%
Number of units outstanding at end of period (000 Omitted) 955
</TABLE>
* Per unit data are based on the average number of units outstanding during
each year.
+ Excluding mortality and expense risk charges and distribution expense
charges.
++ Annualized.
# For the period from May 1, 1995, (commencement of Level 2 Units) through
December 31, 1995.
## Ratios do not reflect expense reductions from directed brokerage and certain
expense offset arrangements.
See notes to financial statements.
29
<PAGE>
Per Unit and Other Data -- continued
<TABLE>
<CAPTION>
Global Governments Variable Account
--------------------------------------------
Compass 2
--------------
Six Months Year Ended
Ended December 31,
June 30, 2000 --------------
(Unaudited) 1999
------------------ -------------
<S> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 19.4589 $ 20.8302
----------- ---------
Investment income ........................................ $ 0.5664 $ 1.0947
Expenses ................................................. 0.2297 0.4789
----------- ---------
Net investment income ................................... $ 0.3367 $ 0.6158
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ........................... (0.6391) (1.9871)
----------- ---------
Net increase (decrease) in unit value .................... $ (0.3024) $ (1.3713)
----------- ---------
Unit value:
Net asset value -- end of period ......................... $ 19.1565 $ 19.4589
=========== =========
Ratios (to average net assets):
Expenses+## .............................................. 1.19%++ 1.11%
Net investment income .................................... 1.76%++ 3.07%
Portfolio turnover ........................................ 97% 172%
Number of units outstanding at end of period (000 Omitted) 169 212
<CAPTION>
Global Governments Variable Account
-------------------------------------------------------
Compass 2
-------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------
1998 1997 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 18.2798 $ 18.6786 $ 18.1095 $ 15.8337
---------- --------- ---------- ----------
Investment income ........................................ $ 1.0806 $ 1.1566 $ 1.2469 $ 1.3112
Expenses ................................................. 0.4506 0.4192 0.4084 0.3863
---------- --------- ---------- ----------
Net investment income ................................... $ 0.6300 $ 0.7374 $ 0.8385 $ 0.9249
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ........................... 1.9204 (1.1362) ( 0.2694) 1.3509
---------- --------- ---------- ----------
Net increase (decrease) in unit value .................... $ 2.5504 $ (0.3988) $ 0.5691 $ 2.2758
---------- --------- ---------- ----------
Unit value:
Net asset value -- end of period ......................... $ 20.8302 $ 18.2798 $ 18.6786 $ 18.1095
========== ========= ========== ==========
Ratios (to average net assets):
Expenses+## .............................................. 1.08% 1.05% 1.00% 1.00%
Net investment income .................................... 3.33% 3.95% 4.54% 5.25%
Portfolio turnover ........................................ 306% 338% 397% 330%
Number of units outstanding at end of period (000 Omitted) 296 435 588 824
</TABLE>
<TABLE>
<CAPTION>
Global Governments Variable Account
-------------------------------------------
Compass 3
--------------
Six Months Year Ended
Ended December 31,
June 30, 2000 --------------
(Unaudited) 1999
------------------ -------------
<S> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 19.1149 $ 20.4924
----------- ---------
Investment income ........................................ $ 0.5547 $ 0.9861
Expenses ................................................. 0.2359 0.4427
----------- ---------
Net investment income ................................... $ 0.3188 $ 0.5434
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ........................... (0.6297) ( 1.9209)
----------- ---------
Net increase (decrease) in unit value .................... $ (0.3109) $ (1.3775)
----------- ---------
Unit value:
Net asset value -- end of period ......................... $ 18.8040 $ 19.1149
=========== =========
Ratios (to average net assets):
Expenses+## .............................................. 1.19%++ 1.11%
Net investment income .................................... 1.76%++ 3.07%
Portfolio turnover ........................................ 97% 172%
Number of units outstanding at end of period (000 Omitted) 139 186
<CAPTION>
Global Governments Variable Account
-------------------------------------------------------
Compass 3
-------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------
1998 1997 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 18.0103 $ 18.4308 $ 17.8962 $ 15.6705
---------- --------- ---------- ----------
Investment income ........................................ $ 1.0464 $ 1.1298 $ 1.2367 $ 1.3045
Expenses ................................................. 0.4279 0.4390 0.4322 0.4086
---------- --------- ---------- ----------
Net investment income ................................... $ 0.6185 $ 0.6908 $ 0.8045 $ 0.8959
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ........................... 1.8636 (1.1113) (0.2699) 1.3298
---------- --------- ---------- ----------
Net increase (decrease) in unit value .................... $ 2.4821 $ (0.4205) $ 0.5346 $ 2.2257
---------- --------- ---------- ----------
Unit value:
Net asset value -- end of period ......................... $ 20.4924 $ 18.0103 $ 18.4308 $ 17.8962
========== ========= ========== ==========
Ratios (to average net assets):
Expenses+## .............................................. 1.08% 1.05% 1.00% 1.00%
Net investment income .................................... 3.33% 3.95% 4.54% 5.25%
Portfolio turnover ........................................ 306% 338% 397% 330%
Number of units outstanding at end of period (000 Omitted) 290 500 789 1,021
</TABLE>
<TABLE>
<CAPTION>
Global Governments Variable Account
------------------------------------------
Compass
3 - Level 2
-------------
Six Months Year Ended
Ended 1999
June 30, 2000 -------------
(Unaudited) December 31,
------------------ -------------
<S> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 11.1296 $ 11.9139
----------- ---------
Investment income ........................................ $ 0.3299 $ 1.8262
Expenses ................................................. 0.1336 0.7827
----------- ---------
Net investment income ................................... $ 0.1963 $ 1.0435
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ........................... ( 0.3692) ( 1.8278)
----------- ---------
Net increase (decrease) in unit value .................... $ (0.1729) $ (0.7843)
----------- ---------
Unit value:
Net asset value -- end of period ......................... $ 10.9567 $ 11.1296
=========== =========
Ratios (to average net assets):
Expenses+## .............................................. 1.19%++ 1.11%
Net investment income .................................... 1.76%++ 3.07%
Portfolio turnover ........................................ 97% 172%
Number of units outstanding at end of period (000 Omitted) 607 641
<CAPTION>
Global Governments Variable Account
------------------------------------------------------------
Compass 3 - Level 2
-----------------------------------------
Year Ended December 31, Period Ended
----------------------------------------- December 31,
1998 1997 1996 1995#
------------- ------------- ------------- ------------------
<S> <C> <C> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 10.4553 $ 10.6836 $ 10.3582 $ 10.0000
---------- --------- ---------- -----------
Investment income ........................................ $ 0.6269 $ 0.6710 $ 0.7308 $ 0.1819
Expenses ................................................. 0.2531 0.2440 0.2391 0.0554
---------- --------- ---------- -----------
Net investment income ................................... $ 0.3738 $ 0.4270 $ 0.4917 $ 0.1265
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ........................... 1.0848 (0.6553) (0.1663) 0.2317
---------- --------- ---------- -----------
Net increase (decrease) in unit value .................... $ 1.4586 $ (0.2283) $ 0.3254 $ 0.3582
---------- --------- ---------- -----------
Unit value:
Net asset value -- end of period ......................... $ 11.9139 $ 10.4553 $ 10.6836 $ 10.3582
========== ========= ========== ===========
Ratios (to average net assets):
Expenses+## .............................................. 1.08% 1.05% 1.00% 1.00%++
Net investment income .................................... 3.33% 3.95% 4.54% 5.25%++
Portfolio turnover ........................................ 306% 338% 397% 330%
Number of units outstanding at end of period (000 Omitted) 695 670 563 316
</TABLE>
* Per unit data are based on the average number of units outstanding during
each year.
+ Excluding mortality and expense risk charges and distribution expense
charges.
++ Annualized.
# For the period from May 1, 1995, (commencement of Level 2 Units) through
December 31, 1995.
## Ratios do not reflect expense reductions from certain expense offset
arrangements.
See notes to financial statements.
30
<PAGE>
Per Unit and Other Data -- continued
<TABLE>
<CAPTION>
Government Securities Variable Account
----------------------------------------------
Compass 2
--------------
Six Months Year Ended
Ended December 31,
June 30, 2000 --------------
(Unaudited) 1999
------------------ -------------
<S> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 28.5233 $ 29.4179
----------- ---------
Investment income ........................................ $ 1.0737 $ 2.0534
Expenses ................................................. 0.2790 0.5578
----------- ---------
Net investment income ................................... $ 0.7947 $ 1.4956
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ........................... 0.1739 (2.3902)
----------- ---------
Net increase (decrease) in unit value .................... $ 0.9686 $ (0.8946)
----------- ---------
Unit value:
Net asset value -- end of period ......................... $ 29.4919 $ 28.5233
=========== =========
Ratios (to average net assets):
Expenses+## .............................................. 0.64%++ 0.63%
Net investment income .................................... 2.69%++ 5.06%
Portfolio turnover ........................................ 38% 75%
Number of units outstanding at end of period (000 Omitted) 3,650 4,228
<CAPTION>
Government Securities Variable Account
-------------------------------------------------------
Compass 2
-------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------
1998 1997 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 27.5372 $ 25.6724 $ 25.5791 $ 22.0031
---------- ---------- ---------- ----------
Investment income ........................................ $ 1.8835 $ 1.9396 $ 1.9022 $ 1.7836
Expenses ................................................. 0.5450 0.5159 0.4873 0.4564
---------- ---------- ---------- ----------
Net investment income ................................... $ 1.3385 $ 1.4237 $ 1.4149 $ 1.3272
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ........................... 0.5422 0.4411 (1.3216) 2.2488
---------- ---------- ---------- ----------
Net increase (decrease) in unit value .................... $ 1.8807 $ 1.8648 $ 0.0933 $ 3.5760
---------- ---------- ---------- ----------
Unit value:
Net asset value -- end of period ......................... $ 29.4179 $ 27.5372 $ 25.6724 $ 25.5791
========== ========== ========== ==========
Ratios (to average net assets):
Expenses+## .............................................. 0.62% 0.66% 0.62% 0.63%
Net investment income .................................... 4.61% 5.31% 5.53% 5.51%
Portfolio turnover ........................................ 137% 168% 39% 80%
Number of units outstanding at end of period (000 Omitted) 4,751 5,613 7,255 8,361
</TABLE>
<TABLE>
<CAPTION>
Government Securities Variable Account
----------------------------------------------
Compass 3
--------------
Six Months Year Ended
Ended December 31,
June 30, 2000 --------------
(Unaudited) 1999
------------------ -------------
<S> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 20.0233 $ 20.6717
----------- ---------
Investment income ........................................ $ 0.7326 $ 1.4104
Expenses ................................................. 0.2007 0.4065
----------- ---------
Net investment income ................................... $ 0.5319 $ 1.0039
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ........................... 0.1379 (1.6523)
----------- ---------
Net increase (decrease) in unit value .................... $ 0.6698 $ (0.6484)
----------- ---------
Unit value:
Net asset value -- end of period ......................... $ 20.6931 $ 20.0233
=========== =========
Ratios (to average net assets):
Expenses+## .............................................. 0.64%++ 0.63%
Net investment income .................................... 2.69%++ 5.06%
Portfolio turnover ........................................ 38% 75%
Number of units outstanding at end of period (000 Omitted) 509 701
<CAPTION>
Government Securities Variable Account
-------------------------------------------------------
Compass 3
-------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------
1998 1997 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 19.3693 $ 18.0755 $ 18.0278 $ 15.5227
---------- ---------- ---------- ----------
Investment income ........................................ $ 1.3267 $ 1.3696 $ 1.3222 $ 1.2529
Expenses ................................................. 0.4061 0.3848 0.3586 0.3385
---------- ---------- ---------- ----------
Net investment income ................................... $ 0.9206 $ 0.9848 $ 0.9636 $ 0.9144
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ........................... 0.3818 0.3090 (0.9159) 1.5907
---------- ---------- ---------- ----------
Net increase (decrease) in unit value .................... $ 1.3024 $ 1.2938 $ 0.0477 $ 2.5051
---------- ---------- ---------- ----------
Unit value:
Net asset value -- end of period ......................... $ 20.6717 $ 19.3693 $ 18.0755 $ 18.0278
========== ========== ========== ==========
Ratios (to average net assets):
Expenses+## .............................................. 0.62% 0.66% 0.62% 0.63%
Net investment income .................................... 4.61% 5.31% 5.53% 5.51%
Portfolio turnover ........................................ 137% 168% 39% 80%
Number of units outstanding at end of period (000 Omitted) 851 1,129 1,549 1,888
</TABLE>
<TABLE>
<CAPTION>
Government Securities Variable Account
----------------------------------------------
Compass 3
- Level 2
-------------
Six Months Year Ended
Ended December 31,
June 30, 2000 -------------
(Unaudited) 1999
------------------ -------------
<S> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 11.6394 $ 11.9984
----------- ---------
Investment income ........................................ $ 0.4331 $ 0.8333
Expenses ................................................. 0.1109 0.2227
----------- ---------
Net investment income ................................... $ 0.3222 $ 0.6106
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ........................... 0.0760 (0.9696)
----------- ---------
Net increase (decrease) in unit value .................... $ 0.3982 $ (0.3590)
----------- ---------
Unit value:
Net asset value -- end of period ......................... $ 12.0376 $ 11.6394
=========== =========
Ratios (to average net assets):
Expenses+## .............................................. 0.64%++ 0.63%
Net investment income .................................... 2.69%++ 5.06%
Portfolio turnover ........................................ 38% 75%
Number of units outstanding at end of period (000 Omitted) 1,548 1,641
<CAPTION>
Government Securities Variable Account
------------------------------------------------------------
Compass 3 - Level 2
-----------------------------------------
Year Ended December 31, Period Ended
----------------------------------------- December 31,
1998 1997 1996 1995#
------------- ------------- ------------- ------------------
<S> <C> <C> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 11.2258 $ 10.4604 $ 10.4172 $ 10.0000
---------- ---------- ---------- -----------
Investment income ........................................ $ 0.7608 $ 0.7931 $ 0.7931 $ 0.1868
Expenses ................................................. 0.2176 0.2102 0.1966 0.0478
---------- ---------- ---------- -----------
Net investment income ................................... $ 0.5432 $ 0.5829 $ 0.5965 $ 0.1390
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ........................... 0.2294 0.1825 ( 0.5533) 0.2782
---------- ---------- ---------- -----------
Net increase (decrease) in unit value .................... $ 0.7726 $ 0.7654 $ 0.0432 $ 0.4172
---------- ---------- ---------- -----------
Unit value:
Net asset value -- end of period ......................... $ 11.9984 $ 11.2258 $ 10.4604 $ 10.4172
========== ========== ========== ===========
Ratios (to average net assets):
Expenses+## .............................................. 0.62% 0.66% 0.62% 0.63%++
Net investment income .................................... 4.61% 5.31% 5.53% 5.51%++
Portfolio turnover ........................................ 137% 168% 39% 80%
Number of units outstanding at end of period (000 Omitted) 1,532 1,319 1,079 608
</TABLE>
* Per unit data are based on the average number of units outstanding during
each year.
+ Excluding mortality and expense risk charges and distribution expense
charges.
++ Annualized.
# For the period from May 1, 1995, (commencement of Level 2 Units) through
December 31, 1995.
## Ratios do not reflect expense reductions from certain expense offset
arrangements.
See notes to financial statements.
31
<PAGE>
Per Unit and Other Data -- continued
<TABLE>
<CAPTION>
High Yield Variable Account
--------------------------------
Compass 2
--------------
Six Months Year Ended
Ended December 31,
June 30, 2000 --------------
(Unaudited) 1999
------------------ -------------
<S> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 33.6297 $ 31.9732
----------- ----------
Investment income ........................................ $ 1.8771 $ 3.4237
Expenses ................................................. 0.3689 0.7284
----------- ----------
Net investment income ................................... $ 1.5082 $ 2.6953
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ........................... (1.5569) (1.0388)
----------- ----------
Net increase (decrease) in unit value .................... $ (0.0487) $ 1.6565
----------- ----------
Unit value:
Net asset value -- end of period ......................... $ 33.5810 $ 33.6297
=========== ==========
Ratios (to average net assets):
Expenses+## .............................................. 0.89%++ 0.90%
Net investment income .................................... 4.36%++ 7.93%
Portfolio turnover ........................................ 46% 153%
Number of units outstanding at end of period (000 Omitted) 2,914 3,065
<CAPTION>
High Yield Variable Account
-------------------------------------------------------
Compass 2
-------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------
1998 1997 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 32.6450 $ 29.0656 $ 26.1493 $ 22.6776
--------- ---------- ---------- ----------
Investment income ........................................ $ 3.3038 $ 3.0237 $ 2.7199 $ 2.5137
Expenses ................................................. 0.7062 0.6627 0.6035 0.5356
--------- ---------- ---------- ----------
Net investment income ................................... $ 2.5976 $ 2.3610 $ 2.1164 $ 1.9781
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ........................... (3.2694) 1.2184 0.7999 1.4936
--------- ---------- ---------- ----------
Net increase (decrease) in unit value .................... $ (0.6718) $ 3.5794 $ 2.9163 $ 3.4717
--------- ---------- ---------- ----------
Unit value:
Net asset value -- end of period ......................... $ 31.9732 $ 32.6450 $ 29.0656 $ 26.1493
========= ========== ========== ==========
Ratios (to average net assets):
Expenses+## .............................................. 0.86% 0.86% 0.8% 0.88%
Net investment income .................................... 7.66% 7.47% 7.5% 7.91%
Portfolio turnover ........................................ 174% 164% 108% 88%
Number of units outstanding at end of period (000 Omitted) 3,667 4,424 4,956 5,649
</TABLE>
<TABLE>
<CAPTION>
High Yield Variable Account
--------------------------------
Compass 3
--------------
Six Months Year Ended
Ended December 31,
June 30, 2000 --------------
(Unaudited) 1999
------------------ -------------
<S> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 24.8324 $ 23.6325
----------- ----------
Investment income ........................................ $ 1.3463 $ 2.4510
Expenses ................................................. 0.2804 0.5524
----------- ----------
Net investment income ................................... 1.0659 $ 1.8986
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ........................... (1.1140) (0.6987)
----------- ----------
Net increase (decrease) in unit value .................... $ (0.0481) $ 1.1999
----------- ----------
Unit value:
Net asset value -- end of period ......................... $ 24.7843 $ 24.8324
=========== ==========
Ratios (to average net assets):
Expenses+## .............................................. 0.89%++ 0.90%
Net investment income .................................... 4.36%++ 7.93%
Portfolio turnover ........................................ 46% 153%
Number of units outstanding at end of period (000 Omitted) 396 427
<CAPTION>
High Yield Variable Account
-------------------------------------------------------
Compass 3
-------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------
1998 1997 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 24.1529 $ 21.5259 $ 19.3854 $ 16.8283
--------- ---------- ---------- ----------
Investment income ........................................ $ 2.3041 $ 2.2363 $ 1.9450 $ 1.8912
Expenses ................................................. 0.5257 0.5196 0.4432 0.4253
--------- ---------- ---------- ----------
Net investment income ................................... $ 1.7784 $ 1.7167 $ 1.5018 $ 1.4659
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ........................... (2.2988) 0.9103 0.6387 1.0912
--------- ---------- ---------- ----------
Net increase (decrease) in unit value .................... $ (0.5204) $ 2.6270 $ 2.1405 $ 2.5571
--------- ---------- ---------- ----------
Unit value:
Net asset value -- end of period ......................... $ 23.6325 $ 24.1529 $ 21.5259 $ 19.3854
========= ========== ========== ==========
Ratios (to average net assets):
Expenses+## .............................................. 0.86% 0.86% 0.88% 0.88%
Net investment income .................................... 7.66% 7.47% 7.59% 7.91%
Portfolio turnover ........................................ 174% 164% 108% 88%
Number of units outstanding at end of period (000 Omitted) 665 1,209 1,438 1,913
</TABLE>
<TABLE>
<CAPTION>
High Yield Variable Account
--------------------------------
Compass
3 - Level 2
-------------
Six Months Year Ended
Ended 1999
June 30, 2000 -------------
(Unaudited) December 31,
------------------ -------------
<S> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 13.1926 $ 12.5366
----------- ----------
Investment income ........................................ $ 0.7734 $ 1.4140
Expenses ................................................. 0.1511 0.2960
----------- ----------
Net investment income ................................... $ 0.6223 $ 1.1180
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ........................... (0.6381) (0.4620)
----------- ----------
Net increase (decrease) in unit value .................... $ (0.0158) $ 0.6560
----------- ----------
Unit value:
Net asset value -- end of period ......................... $ 13.1768 $ 13.1926
=========== ==========
Ratios (to average net assets):
Expenses+## .............................................. 0.89%++ 0.90%
Net investment income .................................... 4.36%++ 7.93%
Portfolio turnover ........................................ 46% 153%
Number of units outstanding at end of period (000 Omitted) 2,634 1,001
<CAPTION>
High Yield Variable Account
------------------------------------------------------------
Compass 3 - Level 2
-----------------------------------------
Year Ended December 31, Period Ended
----------------------------------------- December 31,
1998 1997 1996 1995#
------------- ------------- ------------- ------------------
<S> <C> <C> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 12.7936 $ 11.3852 $ 10.2377 $ 10.0000
--------- ---------- ---------- -----------
Investment income ........................................ $ 1.1776 $ 1.1903 $ 0.9246 $ 0.3803
Expenses ................................................. 0.2556 0.2584 0.2033 0.0765
--------- ---------- ---------- -----------
Net investment income ................................... $ 0.9220 $ 0.9319 $ 0.7213 $ 0.3038
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ........................... (1.1790) 0.4765 0.4262 (0.0661)
--------- ---------- ---------- -----------
Net increase (decrease) in unit value .................... $ (0.2570) $ 1.4084 $ 1.1475 $ 0.2377
--------- ---------- ---------- -----------
Unit value:
Net asset value -- end of period ......................... $ 12.5366 $ 12.7936 $ 11.3852 $ 10.2377
========= ========== ========== ===========
Ratios (to average net assets):
Expenses+## .............................................. 0.86% 0.86% 0.88% 0.88%++
Net investment income .................................... 7.66% 7.47% 7.59% 7.91%++
Portfolio turnover ........................................ 174% 164% 108% 88%
Number of units outstanding at end of period (000 Omitted) 971 2,042 1,819 1,368
</TABLE>
* Per unit data are based on the average number of units outstanding during
each year.
+ Excluding mortality and expense risk charges and distribution expense
charges.
++ Annualized.
# For the period from May 1, 1995, (commencement of Level 2 Units) through
December 31, 1995.
## Ratios do not reflect expense reductions from certain expense offset
arrangements.
See notes to financial statements.
32
<PAGE>
Per Unit and Other Data -- continued
<TABLE>
<CAPTION>
Managed Sectors Variable Account
-------------------------------------
Compass 2
-----------------
Six Months Year Ended
Ended December 31,
June 30, 2000 -----------------
(Unaudited) 1999
-------------------- ----------------
<S> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 92.8647 $ 50.4880
---------- ---------
Investment income ........................................ $ 0.3352 $ 0.4931
Expenses ................................................. 0.9616 1.2364
---------- ---------
Net investment loss ..................................... $ (0.6264) $ (0.7433)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ........................... (6.6169) 43.1200
---------- ---------
Net increase (decrease) in unit value .................... $ (7.2433) $ 42.3767
---------- ---------
Unit value:
Net asset value -- end of period ......................... $ 85.6214 $ 92.8647
========== =========
Ratios (to average net assets):
Expenses+## .............................................. 0.84%++ 0.84%
Net investment loss ...................................... (0.70)%++ (1.30)%
Portfolio turnover ........................................ 270% 417%
Number of units outstanding at end of period (000 Omitted) 737 686
<CAPTION>
Managed Sectors Variable Account
-------------------------------------------------------------------
Compass 2
-------------------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------------------
1998 1997 1996 1995
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 45.4522 $ 36.5900 $ 31.3870 $ 23.9044
--------- --------- --------- ---------
Investment income ........................................ $ 0.2611 $ 0.2406 $ 0.2838 $ 0.3277
Expenses ................................................. 0.9850 0.8842 0.7089 0.6066
--------- --------- --------- ---------
Net investment loss ..................................... $ (0.7239) $ (0.6436) $ (0.4251) $ (0.2789)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ........................... 5.7597 9.5058 5.6281 7.7615
--------- --------- --------- ---------
Net increase (decrease) in unit value .................... $ 5.0358 $ 8.8622 $ 5.2030 $ 7.4826
--------- --------- --------- ---------
Unit value:
Net asset value -- end of period ......................... $ 50.4880 $ 45.4522 $ 36.5900 $ 31.3870
========= ========= ========= =========
Ratios (to average net assets):
Expenses+## .............................................. 0.84% 0.85% 0.85% 0.87%
Net investment loss ...................................... (1.59)% (1.60)% (1.36)% (1.07)%
Portfolio turnover ........................................ 159% 103% 64% 115%
Number of units outstanding at end of period (000 Omitted) 681 736 729 788
</TABLE>
<TABLE>
<CAPTION>
Managed Sectors Variable Account
-------------------------------------
Compass 3
-----------------
Six Months Year Ended
Ended December 31,
June 30, 2000 -----------------
(Unaudited) 1999
-------------------- ----------------
<S> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 91.8703 $ 50.0213
---------- ---------
Investment income ........................................ 0.3141 $ 0.4727
Expenses ................................................. 1.0045 1.2902
---------- ---------
Net investment loss ..................................... $ (0.6904) $ (0.8175)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ........................... (6.5379) 42.6665
---------- ---------
Net increase (decrease) in unit value .................... $ (7.2283) $ 41.8490
---------- ---------
Unit value:
Net asset value -- end of period ......................... $ 84.6420 $ 91.8703
========== =========
Ratios (to average net assets):
Expenses+## .............................................. 0.84%++ 0.84%
Net investment loss ...................................... (0.70)%++ (1.30)%
Portfolio turnover ........................................ 270% 417%
Number of units outstanding at end of period (000 Omitted) 679 785
<CAPTION>
Managed Sectors Variable Account
-------------------------------------------------------------------
Compass 3
-------------------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------------------
1998 1997 1996 1995
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 45.0995 $ 36.3604 $ 31.2371 $ 23.8258
--------- --------- --------- ---------
Investment income ........................................ $ 0.2543 $ 0.2328 $ 0.2830 $ 0.3259
Expenses ................................................. 1.0369 0.9264 0.7511 0.6452
--------- --------- --------- ---------
Net investment loss ..................................... $ (0.7826) $ (0.6936) $ (0.4681) $ (0.3193)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ........................... 5.7044 9.4327 5.5914 7.7306
--------- --------- --------- ---------
Net increase (decrease) in unit value .................... $ 4.9218 $ 8.7391 $ 5.1233 $ 7.4113
--------- --------- --------- ---------
Unit value:
Net asset value -- end of period ......................... $ 50.0213 $ 45.0995 $ 36.3604 $ 31.2371
========= ========= ========= =========
Ratios (to average net assets):
Expenses+## .............................................. 0.84% 0.85% 0.85% 0.87%
Net investment loss ...................................... (1.59)% (1.60)% (1.36)% (1.07)%
Portfolio turnover ........................................ 159% 103% 64% 115%
Number of units outstanding at end of period (000 Omitted) 988 1,258 1,552 1,729
</TABLE>
<TABLE>
<CAPTION>
Managed Sectors Variable Account
-------------------------------------
Compass
3 - Level 2
----------------
Six Months Year Ended
Ended 1999
June 30, 2000 ----------------
(Unaudited) December 31,
-------------------- ----------------
<S> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 29.5539 $ 16.0677
---------- ---------
Investment income ........................................ $ 0.1064 $ 0.1592
Expenses ................................................. 0.3071 0.4006
---------- ---------
Net investment loss ..................................... $ (0.2007) $ (0.2414)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ........................... (2.1044) 13.7276
---------- ---------
Net increase (decrease) in unit value .................... $ (2.3051) $ 13.4862
---------- ---------
Unit value:
Net asset value -- end of period ......................... $ 27.2488 $ 29.5539
========== =========
Ratios (to average net assets):
Expenses+## .............................................. 0.84%++ 0.84%
Net investment loss ...................................... (0.70)%++ (1.30)%
Portfolio turnover ........................................ 270% 417%
Number of units outstanding at end of period (000 Omitted) 3,485 3,115
<CAPTION>
Managed Sectors Variable Account
---------------------------------------------------
Compass 3 - Level 2
--------------------------------------------------
Year Ended December 31,
--------------------------------------------------
1998 1997 1996
---------------- ---------------- ----------------
<S> <C> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 14.4652 $ 11.6449 $ 9.9892
--------- --------- ---------
Investment income ........................................ $ 0.0880 $ 0.0831 $ 0.0873
Expenses ................................................. 0.3308 0.3015 0.2287
--------- --------- ---------
Net investment loss ..................................... $ (0.2428) $ (0.2184) $ (0.1414)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ........................... 1.8453 3.0387 1.7971
--------- --------- ---------
Net increase (decrease) in unit value .................... $ 1.6025 $ 2.8203 $ 1.6557
--------- --------- ---------
Unit value:
Net asset value -- end of period ......................... $ 16.0677 $ 14.4652 $ 11.6449
========= ========= =========
Ratios (to average net assets):
Expenses+## .............................................. 0.84% 0.85% 0.85%
Net investment loss ...................................... (1.59)% (1.60)% (1.36)%
Portfolio turnover ........................................ 159% 103% 64%
Number of units outstanding at end of period (000 Omitted) 2,542 2,156 1,204
<CAPTION>
Managed Sectors
Variable Account
--------------------
Period Ended
December 31,
1995#
--------------------
<S> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 10.0000
----------
Investment income ........................................ $ 0.0231
Expenses ................................................. 0.0539
----------
Net investment loss ..................................... $ (0.0308)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ........................... 0.0200
----------
Net increase (decrease) in unit value .................... $ (0.0108)
----------
Unit value:
Net asset value -- end of period ......................... $ 9.9892
==========
Ratios (to average net assets):
Expenses+## .............................................. 0.87%++
Net investment loss ...................................... (1.07)%++
Portfolio turnover ........................................ 115%
Number of units outstanding at end of period (000 Omitted) 418
</TABLE>
* Per unit data are based on the average number of units outstanding during
each year.
+ Excluding mortality and expense risk charges and distribution expense
charges.
++ Annualized.
# For the period from May 1, 1995, (commencement of Level 2 Units) through
December 31, 1995.
## Ratios do not reflect expense reductions from directed brokerage and certain
expense offset arrangements.
See notes to financial statements.
33
<PAGE>
Per Unit and Other Data -- continued
<TABLE>
<CAPTION>
Money Market Variable Account
--------------------------------
Compass 2
--------------
Six Months Year Ended
Ended December 31,
June 30, 2000 --------------
(Unaudited) 1999
------------------ -------------
<S> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 18.9969 $ 18.3907
----------- ----------
Investment income ........................................ $ 0.5770 $ 0.9598
Expenses ................................................. 0.1800 0.3536
----------- ----------
Net investment income ................................... $ 0.3970 $ 0.6062
----------- ----------
Net increase in unit value ............................... $ 0.3970 $ 0.6062
----------- ----------
Unit value:
Net asset value -- end of period ......................... $ 19.3939 $ 18.9969
=========== ==========
Ratios (to average net assets):
Expenses+## .............................................. 0.59%++ 0.58%
Net investment income .................................... 2.07%++ 3.25%
Number of units outstanding at end of period (000 Omitted) 3,576 3,749
<CAPTION>
Money Market Variable Account
-------------------------------------------------------
Compass 2
-------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------
1998 1997 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 17.7451 $ 17.1109 $ 16.5213 $ 15.8699
---------- ---------- ---------- ----------
Investment income ........................................ $ 0.9924 $ 0.9600 $ 0.9058 $ 0.9560
Expenses ................................................. 0.3468 0.3258 0.3162 0.3046
---------- ---------- ---------- ----------
Net investment income ................................... $ 0.6456 $ 0.6342 $ 0.5896 $ 0.6514
---------- ---------- ---------- ----------
Net increase in unit value ............................... $ 0.6456 $ 0.6342 $ 0.5896 $ 0.6514
---------- ---------- ---------- ----------
Unit value:
Net asset value -- end of period ......................... $ 18.3907 $ 17.7451 $ 17.1109 $ 16.5213
========== ========== ========== ==========
Ratios (to average net assets):
Expenses+## .............................................. 0.59% 0.59% 0.58% 0.58%
Net investment income .................................... 3.58% 3.56% 3.49% 4.00%
Number of units outstanding at end of period (000 Omitted) 4,123 4,639 5,208 6,501
</TABLE>
<TABLE>
<CAPTION>
Money Market Variable Account
--------------------------------
Compass 3
--------------
Six Months Year Ended
Ended December 31,
June 30, 2000 --------------
(Unaudited) 1999
------------------ -------------
<S> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 15.6384 $ 15.1544
----------- ----------
Investment income ........................................ $ 0.4692 $ 0.7807
Expenses ................................................. 0.1501 0.2967
----------- ----------
Net investment income ................................... $ 0.3191 $ 0.4840
----------- ----------
Net increase in unit value ............................... $ 0.3191 $ 0.4840
----------- ----------
Unit value:
Net asset value -- end of period ......................... $ 15.9575 $ 15.6384
=========== ==========
Ratios (to average net assets):
Expenses+## .............................................. 0.59%++ 0.58%
Net investment income .................................... 2.07%++ 3.25%
Number of units outstanding at end of period (000 Omitted) 496 863
<CAPTION>
Money Market Variable Account
-------------------------------------------------------
Compass 3
-------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------
1998 1997 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 14.6369 $ 14.1277 $ 13.6545 $ 13.1291
---------- ---------- ---------- ----------
Investment income ........................................ $ 0.8199 $ 0.7782 $ 0.7437 $ 0.7885
Expenses ................................................. 0.3024 0.2690 0.2705 0.2631
---------- ---------- ---------- ----------
Net investment income ................................... $ 0.5175 $ 0.5092 $ 0.4732 $ 0.5254
---------- ---------- ---------- ----------
Net increase in unit value ............................... $ 0.5175 $ 0.5092 $ 0.4732 $ 0.5254
---------- ---------- ---------- ----------
Unit value:
Net asset value -- end of period ......................... $ 15.1544 $ 14.6369 $ 14.1277 $ 13.6545
========== ========== ========== ==========
Ratios (to average net assets):
Expenses+## .............................................. 0.59% 0.59% 0.58% 0.58%
Net investment income .................................... 3.58% 3.56% 3.49% 4.00%
Number of units outstanding at end of period (000 Omitted) 1,370 1,160 1,930 3,929
</TABLE>
<TABLE>
<CAPTION>
Money Market Variable Account
--------------------------------
Compass 3
- Level 2
-------------
Six Months Year Ended
Ended December 31,
June 30, 2000 -------------
(Unaudited) 1999
------------------ -------------
<S> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 11.6362 $ 11.2593
----------- ----------
Investment income ........................................ $ 0.3507 $ 0.5792
Expenses ................................................. 0.1046 0.2023
----------- ----------
Net investment income ................................... $ 0.2461 $ 0.3769
----------- ----------
Net increase in unit value ............................... $ 0.2461 $ 0.3769
----------- ----------
Unit value:
Net asset value -- end of period ......................... $ 11.8823 $ 11.6362
=========== ==========
Ratios (to average net assets):
Expenses+## .............................................. 0.59%++ 0.58%
Net investment income .................................... 2.07%++ 3.25%
Number of units outstanding at end of period (000 Omitted) 1,571 3,875
<CAPTION>
Money Market Variable Account
------------------------------------------------------------
Compass 3 - Level 2
-----------------------------------------
Year Ended Deceember 31, Period Ended
----------------------------------------- December 31,
1998 1997 1996 1995#
------------- ------------- ------------- ------------------
<S> <C> <C> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 10.8587 $ 10.4654 $ 10.0997 $ 10.0000
---------- ---------- ---------- -----------
Investment income ........................................ $ 0.6068 $ 0.5838 $ 0.5993 $ 0.1358
Expenses ................................................. 0.2062 0.1905 0.2336 0.0361
---------- ---------- ---------- -----------
Net investment income ................................... $ 0.4006 $ 0.3933 $ 0.3657 $ 0.0997
---------- ---------- ---------- -----------
Net increase in unit value ............................... $ 0.4006 $ 0.3933 $ 0.3657 $ 0.0997
---------- ---------- ---------- -----------
Unit value:
Net asset value -- end of period ......................... $ 11.2593 $ 10.8587 $ 10.4654 $ 10.0997
========== ========== ========== ===========
Ratios (to average net assets):
Expenses+## .............................................. 0.59% 0.59% 0.58% 0.58%++
Net investment income .................................... 3.58% 3.56% 3.49% 4.00%++
Number of units outstanding at end of period (000 Omitted) 3,141 1,104 897 561
</TABLE>
* Per unit data are based on the average number of units outstanding during
each year.
+ Excluding mortality and expense risk charges and distribution expense
charges.
++ Annualized.
# For the period from May 1, 1995, (commencement of Level 2 Units) through
December 31, 1995.
## Ratios do not reflect expense reductions from certain expense offset
arrangements.
See notes to financial statements.
34
<PAGE>
Per Unit and Other Data -- continued
<TABLE>
<CAPTION>
Total Return Variable Account
--------------------------------
Compass 2
--------------
Six Months Year Ended
Ended December 31,
June 30, 2000 --------------
(Unaudited) 1999
------------------ -------------
<S> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 33.7285 $ 33.2507
----------- ----------
Investment income ........................................ $ 0.7197 $ 1.3733
Expenses ................................................. 0.3482 0.7013
----------- ----------
Net investment income ................................... $ 0.3715 $ 0.6720
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ........................... 0.3289 (0.1942)
----------- ----------
Net increase in unit value ............................... $ 0.7004 $ 0.4778
----------- ----------
Unit value:
Net asset value -- end of period ......................... $ 34.4289 $ 33.7285
=========== ==========
Ratios (to average net assets):
Expenses+## .............................................. 0.83%++ 0.83%
Net investment income .................................... 1.06%++ 1.90%
Portfolio turnover ........................................ 49% 106%
Number of units outstanding at end of period (000 Omitted) 2,413 2,925
<CAPTION>
Total Return Variable Account
-------------------------------------------------------
Compass 2
-------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------
1998 1997 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 30.1563 $ 25.0444 $ 22.2577 $ 17.4729
---------- ---------- ---------- ----------
Investment income ........................................ $ 1.3940 $ 1.3666 $ 1.1203 $ 1.0394
Expenses ................................................. 0.6750 0.6070 0.4844 0.4118
---------- ---------- ---------- ----------
Net investment income ................................... $ 0.7190 $ 0.7596 $ 0.6359 $ 0.6276
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ........................... 2.3754 4.3523 2.1508 4.1572
---------- ---------- ---------- ----------
Net increase in unit value ............................... $ 3.0944 $ 5.1119 $ 2.7867 $ 4.7848
---------- ---------- ---------- ----------
Unit value:
Net asset value -- end of period ......................... $ 33.2507 $ 30.1563 $ 25.0444 $ 22.2577
========== ========== ========== ==========
Ratios (to average net assets):
Expenses+## .............................................. 0.82% 0.83% 0.82% 0.83%
Net investment income .................................... 2.10% 2.32% 2.59% 2.99%
Portfolio turnover ........................................ 125% 111% 140% 105%
Number of units outstanding at end of period (000 Omitted) 3,495 3,956 4,414 4,801
</TABLE>
<TABLE>
<CAPTION>
Total Return Variable Account
--------------------------------
Compass 3
--------------
Six Months Year Ended
Ended December 31,
June 30, 2000 --------------
(Unaudited) 1999
------------------ -------------
<S> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 33.1340 $ 32.7131
----------- ----------
Investment income ........................................ $ 0.6851 $ 1.3153
Expenses ................................................. 0.3598 0.7274
----------- ----------
Net investment income ................................... $ 0.3253 $ 0.5879
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ........................... 0.3378 (0.1670)
----------- ----------
Net increase in unit value ............................... $ 0.6631 $ 0.4209
----------- ----------
Unit value:
Net asset value -- end of period ......................... $ 33.7971 $ 33.1340
=========== ==========
Ratios (to average net assets):
Expenses+## .............................................. 0.83%++ 0.83%
Net investment income .................................... 1.06%++ 1.90%
Portfolio turnover ........................................ 49% 106%
Number of units outstanding at end of period (000 Omitted) 1,608 2,125
<CAPTION>
Total Return Variable Account
-------------------------------------------------------
Compass 3
-------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------
1998 1997 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 29.7131 $ 24.7133 $ 21.9966 $ 17.2937
---------- ---------- ---------- ----------
Investment income ........................................ $ 1.3028 $ 1.1487 $ 1.0817 $ 1.0122
Expenses ................................................. 0.6835 0.5870 0.5068 0.4358
---------- ---------- ---------- ----------
Net investment income ................................... $ 0.6193 $ 0.5617 $ 0.5749 $ 0.5764
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ........................... 2.3807 4.4381 2.1418 4.1265
---------- ---------- ---------- ----------
Net increase in unit value ............................... $ 3.0000 $ 4.9998 $ 2.7167 $ 4.7029
---------- ---------- ---------- ----------
Unit value:
Net asset value -- end of period ......................... $ 32.7131 $ 29.7131 $ 24.7133 $ 21.9966
========== ========== ========== ==========
Ratios (to average net assets):
Expenses+## .............................................. 0.82% 0.83% 0.82% 0.83%
Net investment income .................................... 2.10% 2.32% 2.59% 2.99%
Portfolio turnover ........................................ 125% 111% 140% 105%
Number of units outstanding at end of period (000 Omitted) 2,943 4,024 5,177 6,322
</TABLE>
<TABLE>
<CAPTION>
Total Return Variable Account
--------------------------------
Compass 3
- Level 2
-------------
Six Months Year Ended
Ended December 31,
June 30, 2000 -------------
(Unaudited) 1999
------------------ -------------
<S> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 15.9013 $ 15.6760
----------- ----------
Investment income ........................................ $ 0.3351 $ 0.6416
Expenses ................................................. 0.1641 0.3306
----------- ----------
Net investment income ................................... $ 0.1710 $ 0.3110
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ........................... 0.1592 (0.0857)
----------- ----------
Net increase in unit value ............................... $ 0.3302 $ 0.2253
----------- ----------
Unit value:
Net asset value -- end of period ......................... $ 16.2315 $ 15.9013
=========== ==========
Ratios (to average net assets):
Expenses+## .............................................. 0.83%++ 0.83%
Net investment income .................................... 1.06%++ 1.90%
Portfolio turnover ........................................ 49% 106%
Number of units outstanding at end of period (000 Omitted) 6,269 6,729
<CAPTION>
Total Return Variable Account
------------------------------------------------------------
Compass 3 - Level 2
-----------------------------------------
Year Ended December 31, Period Ended
----------------------------------------- December 31,
1998 1997 1996 1995#
------------- ------------- ------------- ------------------
<S> <C> <C> <C> <C>
Per unit data:*
Net asset value -- beginning of period ................... $ 14.2173 $ 11.8074 $ 10.4938 $ 10.0000
---------- ---------- ---------- -----------
Investment income ........................................ $ 0.6344 $ 0.5718 $ 0.5280 $ 0.1247
Expenses ................................................. 0.3107 0.2715 0.2317 0.0525
---------- ---------- ---------- -----------
Net investment income ................................... $ 0.3237 $ 0.3003 $ 0.2963 $ 0.0722
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ........................... 1.1350 2.1096 1.0173 0.4216
---------- ---------- ---------- -----------
Net increase in unit value ............................... $ 1.4587 $ 2.4099 $ 1.3136 $ 0.4938
---------- ---------- ---------- -----------
Unit value:
Net asset value -- end of period ......................... $ 15.6760 $ 14.2173 $ 11.8074 $ 10.4938
========== ========== ========== ===========
Ratios (to average net assets):
Expenses+## .............................................. 0.82% 0.83% 0.82% 0.83%++
Net investment income .................................... 2.10% 2.32% 2.59% 2.99%++
Portfolio turnover ........................................ 125% 111% 140% 105%
Number of units outstanding at end of period (000 Omitted) 6,702 5,260 3,717 1,637
</TABLE>
* Per unit data are based on the average number of units outstanding during
each year.
+ Excluding mortality and expense risk charges and distribution expense
charges.
++ Annualized.
# For the period from May 1, 1995, (commencement of Level 2 Units) through
December 31, 1995.
## Ratios do not reflect expense reductions from certain expense offset
arrangements.
See notes to financial statements.
35
<PAGE>
Notes to Financial Statements (Unaudited)
(1) Organization
Capital Appreciation Variable Account, Global Governments Variable Account,
Government Securities Variable Account, High Yield Variable Account, Managed
Sectors Variable Account, Money Market Variable Account, and Total Return
Variable Account (the variable account(s)) are separate accounts established by
Sun Life Assurance Company of Canada (U.S.), the Sponsor, in connection with
the issuance of Compass 2 and Compass 3 combination fixed/variable annuity
contracts. Capital Appreciation Variable Account, Government Securities
Variable Account, Money Market Variable Account, and Total Return Variable
Account operate as open-end, diversified management investment companies, and
Global Governments Variable Account, High Yield Variable Account, and Managed
Sectors Variable Account operate as open-end, nondiversified management
investment companies as those terms are defined in the Investment Company Act
of 1940, as amended.
(2) Significant Accounting Policies
General -- The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Investments
in foreign securities are vulnerable to the effects of changes in the relative
values of the local currency and the U.S. dollar and to the effects of changes
in each country's legal, political, and economic environment.
Investment Valuations -- Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last sale
prices. Unlisted equity securities or listed equity securities for which last
sale prices are not available are reported at market value using last quoted
bid prices. Debt securities (other than short-term obligations which mature in
60 days or less), including listed issues and forward contracts, are valued on
the basis of valuations furnished by dealers or by a pricing service with
consideration to factors such as institutional-size trading in similar groups
of securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics, and other market data, without exclusive reliance upon
exchange or over-the-counter prices. Money market instruments are valued at
amortized cost, which the Trustees have determined in good faith approximates
market value. The account's use of amortized cost is subject to the account's
compliance with certain conditions as specified under Rule 2a-7 of the
Investment Company Act of 1940. Short-term obligations, which mature in 60 days
or less, are valued at amortized cost, which approximates market value.
Non-U.S. dollar denominated short-term obligations are valued at amortized cost
as calculated in the foreign currency and translated into U.S. dollars at the
closing daily exchange rate. Futures contracts, options, and options on futures
contracts listed on commodities exchanges are reported at market value using
closing settlement prices. Over-the-counter options on securities are valued by
brokers. Over-the-counter currency options are valued through the use of a
pricing model which takes into account foreign currency exchange spot and
forward rates, implied volatility, and short-term repurchase rates. Securities
for which there are no such quotations or valuations are valued in good faith,
at fair value, by the Boards of Managers.
Repurchase Agreements -- Certain variable accounts may enter into repurchase
agreements with institutions that the variable account's investment adviser has
determined are creditworthy. Each repurchase agreement is recorded at cost. The
variable accounts require that the securities collateral in a repurchase
transaction be transferred to the custodian in a manner sufficient to enable
the account to obtain those securities in the event of a default under the
repurchase agreement. The variable accounts monitor, on a daily basis, the
value of the collateral to ensure that its value, including accrued interest,
is greater than the amount owed to the variable account under each such
repurchase agreement. The variable accounts, along with other affiliated
entities of Massachusetts Financial Services Company (MFS), may utilize a joint
trading account for the purpose of entering into one or more repurchase
agreements.
Foreign Currency Translation -- Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates
of such transactions. Gains and losses attributable to foreign currency
exchange rates on sales of securities are recorded for financial statement
purposes as net realized gains and losses on investments. Gains and losses
attributable to foreign exchange rate movements on income and expenses are
recorded for financial statement purposes as foreign currency transaction gains
and losses. That portion of both realized and unrealized gains and losses on
investments that results from fluctuations in foreign currency exchange rates
is not separately disclosed.
Written Options -- Certain variable accounts may write call or put options in
exchange for a premium. The premium is initially recorded as a liability which
is subsequently adjusted to the current value of the options contract. When a
written option expires, the account realizes a gain equal to the amount of the
premium received. When a written call option is exercised or closed, the
premium received is offset against the proceeds to determine the realized gain
or loss. When a written put option is exercised, the premium reduces the cost
basis of the security purchased by the account. The account, as writer of an
option, may have no control over whether the underlying securities may be sold
(call) or purchased (put) and, as a result, bears the market risk of an
unfavorable change in the price of the securities underlying the written
option. In general, written call options may serve as a partial hedge against
decreases in value in the underlying securities to the extent of the premium
received. Written options may also be used as part of an income producing
strategy reflecting the view of the variable account's management on the
direction of interest rates.
Forward Foreign Currency Exchange Contracts -- Certain variable accounts may
enter into forward foreign currency exchange contracts for the purchase or sale
of a specific foreign currency at a fixed price on a future date. Risks may
arise upon entering into these contracts from the potential inability of
counterparties to meet the terms of their contracts and from unanticipated
movements in the value of a foreign currency relative to the
36
<PAGE>
Notes to Financial Statements (Unaudited) -- continued
U.S. dollar. The accounts may enter into forward contracts for hedging purposes
as well as for non-hedging purposes. For hedging purposes, certain variable
accounts may enter into contracts to deliver or receive foreign currency they
will receive from or require for their normal investment activities. The
accounts may also use contracts in a manner intended to protect foreign
currency-denominated securities from declines in value due to unfavorable
exchange rate movements. For non-hedging purposes, certain variable accounts
may enter into contracts with the intent of changing the relative exposure of
the accounts' portfolio of securities to different currencies to take advantage
of anticipated changes. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains or
losses are recorded as unrealized until the contract settlement date. On
contract settlement date, the gains or losses are recorded as realized gains or
losses on foreign currency transactions.
Federal Income Taxes -- The variable accounts are funding vehicles for
individual variable annuities. The operations of the variable accounts are part
of the operations of Sun Life Assurance Company of Canada (U.S.), the Sponsor,
and are not taxed separately; the variable accounts are not taxed as regulated
investment companies. The Sponsor qualifies for the federal income tax
treatment granted to life insurance companies under Subchapter L of the
Internal Revenue Code. Accordingly, no provision for federal income or excise
tax is necessary. Foreign taxes have been provided for on interest and dividend
income earned on foreign investments in accordance with the applicable
country's tax rates and to the extent unrecoverable are recorded as a reduction
of investment income.
Investment Transactions and Income -- Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All discount
is accreted for financial statement purposes. Dividends received in cash are
recorded on the ex-dividend date. Dividend and interest payments received in
additional securities are recorded on the ex-dividend or ex-interest date in an
amount equal to the value of the security on such date. Certain of the variable
accounts use the effective interest method for reporting interest income on
payment-in-kind (PIK) bonds. Legal fees and other related expenses incurred to
preserve and protect the value of a security owned are added to the cost of the
security; other legal fees are expensed. Capital infusions made directly to the
security issuer, which are generally non-recurring, incurred to protect or
enhance the value of high-yield debt securities, are reported as additions to
the cost basis of the security. Costs that are incurred to negotiate the terms
or conditions of capital infusions or that are expected to result in a plan of
reorganization are reported as realized losses. Ongoing costs incurred to
protect or enhance an investment, or costs incurred to pursue other claims or
legal actions, are expensed.
Fees Paid Indirectly -- The variable accounts' custody fees are reduced
according to an arrangement that measures the value of cash deposited with the
custodian by the variable accounts. During the period, each variable account's
custodian fees were reduced under this arrangement. The Capital Appreciation
Variable Account, Managed Sectors Variable Account, and Total Return Variable
Account have entered into a directed brokerage agreement, under which the
broker will credit the variable account a portion of the commissions generated,
to offset certain expenses of the variable account. For the period, the
variable accounts' custodian fees were reduced under this agreement. These
amounts are shown as a reduction of expenses on the Statement of Operations.
<TABLE>
<CAPTION>
Capital Appreciation Account Managed Sectors Account Total Return Variable Account
------------------------------ ------------------------- ------------------------------
<S> <C> <C> <C>
Balance credits ..................... $22,031 $ 5,460 $ --
Directed brokerage credits .......... 38,559 13,566 588
------- ------- ----
$60,590 $19,026 $588
======= ======= ====
</TABLE>
(3) Contract Charges
The Sponsor makes a deduction from the variable accounts at the end of each
valuation period, during both the accumulation period and after annuity
payments begin, for assuming the mortality and expense risks under the
contracts. The rate of the deduction may be changed annually but in no event
may it exceed 1.25% of the average net assets of each variable account
attributable to Compass 3 contracts, or, with respect to Compass 2 contracts,
1.30% of the assets of Capital Appreciation Variable Account, Government
Securities Variable Account, High Yield Variable Account, and Money Market
Variable Account, or 1.25% of the assets of Global Governments Variable
Account, Managed Sectors Variable Account, and Total Return Variable Account
attributable to such contracts.
For assuming the distribution expense risk under Compass 3 contracts, the
Sponsor makes a deduction from the variable accounts at the end of each
valuation period for the first seven contract years at an effective annual rate
of 0.15% of the net assets of the variable accounts attributable to such
contracts. Contracts are transferred from Compass 3 to Compass 3 -- Level 2 in
the month following the seventh contract anniversary. No deduction is made
after the seventh contract anniversary. No deduction is made with respect to
assets attributable to Compass 2 contracts.
Each year, on the contract anniversary, a contract maintenance charge of $25
with respect to Compass 2 contracts and $30 with respect to Compass 3 contracts
is deducted from each contract's accumulation account and paid the Sponsor to
cover administrative expenses relating to the contract. After the annuity
commencement date, the annual contract maintenance charge is deducted pro rata
from each annuity payment made during the year.
The Sponsor does not deduct a sales charge from purchase payments. However, a
withdrawal charge (contingent deferred sales charge) may be deducted to cover
certain expenses relating to the sale of the contract. In no event shall the
aggregate withdrawal charges (including the distribution expense charge
described above applicable to Compass 3 contracts) exceed 5% of the purchase
payments made under a Compass 2 contract or 9% of the purchase payments made
under a Compass 3 contract.
37
<PAGE>
Notes to Financial Statements (Unaudited) -- continued
(4) Annuity Reserves
Annuity reserves for contracts with annuity commencement dates prior to
February 1, 1987, have been calculated using the 1971 Individual Annuitant
Mortality Table. Annuity reserves for contracts with annuity commencement dates
on or after February 1, 1987, are calculated using the 1983 Individual
Annuitant Mortality Table. Annuity reserves for contracts in payment period are
calculated using an assumed interest rate of 4%. Required adjustments are
accomplished by transfers to or from the Sponsor.
(5) Management Agreements
The Management Agreements provide that the variable accounts will pay the
Investment Adviser, Massachusetts Financial Services Company, an affiliate of
the Sponsor, a fee computed daily and paid monthly at an effective annual rate
based on a percentage of each variable account's average daily net assets as
follows:
<TABLE>
<CAPTION>
Annual Rate of Management Fee Annual Rate of Management Fee
Based on Average Based on Average
Daily Net Assets Daily Net Assets
Not Exceeding $300 Million in Excess of $300 Million
------------------------------- ------------------------------
<S> <C> <C>
Capital Appreciation Variable Account .......... 0.75% 0.675%
Global Governments Variable Account ............ 0.75% 0.675%
Government Securities Variable Account ......... 0.55% 0.495%
High Yield Variable Account .................... 0.75% 0.675%
Managed Sectors Variable Account ............... 0.75% 0.675%
Money Market Variable Account .................. 0.50% 0.500%
Total Return Variable Account .................. 0.75% 0.675%
</TABLE>
The agreements also provide that the Investment Adviser will pay certain
variable account expenses in excess of 1.25% of the average daily net assets of
each variable account for any calendar year. The variable accounts pay no
compensation directly to their officers or members of the Boards of Managers
who are affiliated with the Investment Adviser or the Sponsor.
Administrator -- The accounts have an administrative services agreement with
MFS to provide the accounts with certain financial, legal, shareholder
servicing, compliance, and other administrative services. As a partial
reimbursement for the cost of providing these services, the accounts incur an
administrative fee at the following annual percentages of the accounts' average
daily net assets:
<TABLE>
<S> <C>
First $2 billion ................ 0.0175%
Next $2.5 billion ............... 0.0130%
Next $2.5 billion ............... 0.0005%
In excess of $7 billion ......... 0.0000%
</TABLE>
(6) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, were as follows:
<TABLE>
<CAPTION>
Purchases Sales
---------------- ----------------
<S> <C> <C>
Capital Appreciation Variable Account .......... $ 591,982,998 $ 640,549,383
Global Governments Variable Account ............ 3,924,881 4,204,693
High Yield Variable Account .................... 70,736,006 55,974,909
Managed Sectors Variable Account ............... 572,571,542 583,490,870
Money Market Variable Account* ................. 1,034,091,031 1,047,742,000
Total Return Variable Account .................. 60,053,287 94,887,840
</TABLE>
Purchases and sales of U.S. government securities, other than purchased option
transactions and short-term obligations, were as follows:
<TABLE>
<CAPTION>
Purchases Sales
---------------- ----------------
<S> <C> <C>
Global Governments Variable Account ............. $ 5,889,720 $ 7,574,213
Government Securities Variable Account .......... 53,724,868 78,942,650
Money Market Variable Account* .................. 3,242,922,273 3,269,560,997
Total Return Variable Account ................... 59,663,930 63,962,008
</TABLE>
*Purchases and sales of investments for Money Market Variable Account consist
solely of short-term obligations.
(7) High Yield Securities and Financial Instruments
Although the High Yield Variable Account has a diversified portfolio, its
portfolio is invested in high-yield securities rated below investment grade or
which are unrated. Investments in high-yield securities involve greater degrees
of credit and market risk than investments in higher-rated securities and tend
to be more sensitive to economic conditions.
38
<PAGE>
Notes to Financial Statements (Unaudited) -- continued
Certain variable accounts trade financial instruments with off-balance sheet
risk in the normal course of their investing activities in order to manage
exposure to market risks such as interest rates and foreign currency exchange
rates. These financial instruments include written options, forward foreign
currency exchange contracts, and futures contracts. The notional or contractual
amounts of these instruments represent the investment the variable accounts
have in particular classes of financial instruments and do not necessarily
represent the amounts potentially subject to risk. The measurement of the risks
associated with these instruments is meaningful only when all related and
offsetting transactions are considered.
Written Option Transactions
<TABLE>
<CAPTION>
Global Governments Variable Account
Number
of Contracts
(000 Omitted) Premiums
--------------- -------------
<S> <C> <C>
Outstanding Beginning of period .................... 5 $ 67,414
Options written .................................... 12 131,853
Options terminated in closing transactions ......... (9) (143,210)
Options exercised .................................. (2) (14,363)
Options expired .................................... (3) (7,050)
----------
Outstanding, end of period ......................... 3 $ 34,644
==========
</TABLE>
Certain options denominated in foreign currencies have been redenominated in
accordance with the Euro Conversion.
At June 30, 2000, the Global Governments Variable Account had sufficient cash
and/or securities at least equal to the value of the written options.
Forward Foreign Currency Exchange Contracts
<TABLE>
<CAPTION>
Net Unrealized
Contracts to Contracts at In Exchange Appreciation
Account Transaction Settlement Date Deliver/Receive Value For (Depreciation)
----------------------------- ------------- ---------------- ----------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
High Yield Variable Account Sales 09-13-00 EUR 700,175 $ 671,230 $ 671,055 $ (175)
=========== ========== ============
Global Governments Variable
Account Sales 06-05-01 BRL 503,348 $ 258,071 $ 255,151 $ (2,920)
09-13-00 DKK 2,519,172 323,312 323,095 (217)
09-13-00 EUR 22,430 21,503 21,104 (399)
09-13-00 GRD 81,519,898 230,601 231,749 1,148
07-24-00 JPY 20,025,200 189,497 192,698 3,201
09-13-00 SEK 57,440 6,551 6,646 95
10-05-00 VEB 278,694,328 397,591 383,173 (14,418)
---------- ---------- ---------
$1,427,126 $1,413,616 $ (13,510)
========== ========== =========
Global Governments Variable
Account Purchases 09-13-00 AUD 263,832 $ 157,897 $ 156,154 $ 1,743
06-05-01 BRL 503,348 258,071 250,609 7,462
09-13-00 EUR 1,533,283 1,469,899 1,471,192 (1,293)
09-13-00 JPY 24,643,189 235,285 238,543 (3,258)
09-13-00 NZD 9,847 4,615 4,628 (13)
10-05-00 VEB 278,694,328 397,591 391,562 6,029
---------- ---------- ---------
$2,523,358 $2,512,688 $ 10,670
========== ========== =========
</TABLE>
At June 30, 2000, forward foreign currency purchases and sales under master
netting agreements for the Global Governments Variable Account excluded above
amounted to a net receivable of $408 with Merrill Lynch, and a net payable of
$1,359 with Deutsche Bank.
At June 30, 2000, the Global Governments Variable Account and the High Yield
Variable Account had sufficient cash and/or securities to cover any commitments
under these contracts.
See page 22 for an explanation of abbreviations used to indicate amounts shown
in currencies other than the U.S. dollar.
39
<PAGE>
Notes to Financial Statements (Unaudited) -- continued
(8) Restricted Securities
Certain of the variable accounts may invest in securities which are subject to
legal or contractual restrictions on resale. At June 30, 2000, High Yield
Variable Account owned the following restricted securities, excluding
securities issued under Rule 144A (consisting of 1.08% of the account's net
assets) which may not be publicly sold without registration under the
Securities Act of 1933. The variable account does not have the right to demand
that such securities be registered. The value of these securities is determined
by valuations furnished by dealers or by a pricing service, or if not
available, in good faith, at fair value, by the Boards of Managers.
<TABLE>
<CAPTION>
Date of Share/Par
Account Description Acquisition Amount Cost Value
----------------------------- --------------------------------- ------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
High Yield Variable Account Airplanes Pass-Through Trust,
10.875s, 2019 3/13/96 $ 740,775 $ 740,775 $ 601,798
Atlantic Gulf Communities Corp. 9/25/95 150 0 12
Envirsource, Inc. 7/30/90 238 7,289 111
Merrill Lynch Mortgage
Investors, Inc., 8.434s, 2022 6/22/94 1,000,000 693,125 955,312
------- -------
$1,441,189 $1,557,233
========== ==========
</TABLE>
(9) Participant Transactions
The changes in net assets from changes in numbers of outstanding units were as
follows:
<TABLE>
<CAPTION>
Six Months Ended June 30, 2000 (000 Omitted)
-------------------------------------------------------------------
Transfers Between Withdrawals,
Variable Accounts Surrenders,
Purchase and Fixed Annuitizations,
Payments Accumulation and Contract
Received Account Charges
----------------- ------------------------- -----------------------
Units Dollars Units Dollars Units Dollars
------- --------- ------------ ------------ --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Capital Appreciation Variable Account
Compass 2 Contracts ................ 34 $ 2,935 (7) $ 101 (378) $ (35,396)
Compass 3 Contracts ................ 93 5,630 (258) (16,087) (105) (6,520)
Compass 3 Level 2 Contracts ........ 70 1,636 748 20,215 (445) (11,349)
------- --------- ---------
$10,201 $ 4,229 $ (53,265)
======= ========= =========
Global Government Variable Account
Compass 2 Contracts ................ 4 $ 64 (18) $ (334) (29) $ (561)
Compass 3 Contracts ................ 10 186 (38) (715) (19) (361)
Compass 3 Level 2 Contracts ........ 9 75 37 428 (80) (861)
------- --------- ---------
$ 325 $ (621) $ (1,783)
======= ========= =========
Government Securities Variable Account
Compass 2 Contracts ................ 25 $ 649 (259) $ (7,579) (344) $ (9,902)
Compass 3 Contracts ................ 26 514 (166) (3,365) (52) (1,058)
Compass 3 Level 2 Contracts ........ 18 185 85 986 (196) (2,297)
------- --------- ---------
$ 1,348 $ (9,958) $ (13,257)
======= ========= =========
High Yield Variable Account
Compass 2 Contracts ................ 26 $ 827 58 $ 1,925 (235) $ (7,938)
Compass 3 Contracts ................ 25 585 (15) (391) (41) (1,017)
Compass 3 Level 2 Contracts ........ 12 115 1,737 22,809 (116) (1,529)
------- --------- ---------
$ 1,527 $ 24,343 $ (10,484)
======= ========= =========
Managed Sectors Variable Account
Compass 2 Contracts ................ 6 $ 465 79 $ 7,960 (34) $ (3,105)
Compass 3 Contracts ................ 37 3,346 (99) (9,265) (44) (4,010)
Compass 3 Level 2 Contracts ........ 34 920 583 17,763 (247) (7,258)
------- --------- ---------
$ 4,731 $ 16,458 $ (14,373)
======= ========= =========
Money Market Variable Account
Compass 2 Contracts ................ 27 $ 494 245 $ 4,699 (445) $ (8,537)
Compass 3 Contracts ................ 118 1,856 (288) (4,546) (197) (3,109)
Compass 3 Level 2 Contracts ........ 12 132 (1,487) (17,637) (829) (9,780)
------- --------- ---------
$ 2,482 $ (17,484) $ (21,426)
======= ========= =========
Total Return Variable Account
Compass 2 Contracts ................ 28 $ 853 (252) $ (8,174) (288) $ (9,614)
Compass 3 Contracts ................ 109 3,473 (463) (15,063) (163) (5,312)
Compass 3 Level 2 Contracts ........ 79 1,142 285 4,767 (824) (12,923)
------- --------- ---------
$ 5,468 $ (18,470) $ (27,849)
======= ========= =========
<CAPTION>
Six Months Ended June 30, 2000 (000 Omitted)
--------------------------------------------------------
Net Net Net
Accumulation Annuitization Increases
Activity Activity (Decrease)
-------------------------- --------------- -------------
Units Dollars Dollars Dollars
----------- -------------- --------------- -------------
<S> <C> <C> <C> <C>
Capital Appreciation Variable Account
Compass 2 Contracts ................ (351) $ (323,600) $ 258 $ (32,102)
Compass 3 Contracts ................ (270) (16,977) (31) (17,008)
Compass 3 Level 2 Contracts ........ 373 10,502 62 10,564
---------- ----- ---------
$ (330,075) $ 289 $ (38,546)
========== ===== =========
Global Government Variable Account
Compass 2 Contracts ................ (43) $ (831) $ 9 $ (822)
Compass 3 Contracts ................ (47) (890) (1) (891)
Compass 3 Level 2 Contracts ........ (34) (358) (15) (373)
---------- ----- ---------
$ (2,079) $ (7) $ (2,086)
========== ===== =========
Government Securities Variable Account
Compass 2 Contracts ................ (578) $ (16,832) $ (3) $ (16,835)
Compass 3 Contracts ................ (192) (3,909) 56 (3,853)
Compass 3 Level 2 Contracts ........ (93) (1,126) (7) (1,133)
---------- ----- ---------
$ (21,867) $ 46 $ (21,821)
========== ===== =========
High Yield Variable Account
Compass 2 Contracts ................ (151) $ (5,186) $(116) $ (5,302)
Compass 3 Contracts ................ (31) (823) (1) (824)
Compass 3 Level 2 Contracts ........ 1,633 21,395 43 21,438
---------- ----- ---------
$ 15,386 $ (74) $ 15,312
========== ===== =========
Managed Sectors Variable Account
Compass 2 Contracts ................ 51 $ 5,320 $ 21 $ 5,341
Compass 3 Contracts ................ (106) (9,929) 2 (9,927)
Compass 3 Level 2 Contracts ........ 370 11,425 (74) 11,351
---------- ----- ---------
$ 6,816 $ (51) $ 6,765
========== ===== =========
Money Market Variable Account
Compass 2 Contracts ................ (173) $ (3,344) $(444) $ (3,788)
Compass 3 Contracts ................ (367) (5,799) (65) (5,864)
Compass 3 Level 2 Contracts ........ (2,304) (27,285) (52) (27,337)
---------- ----- ---------
$ (36,428) $(561) $ (36,989)
========== ===== =========
Total Return Variable Account
Compass 2 Contracts ................ (512) $ (16,935) $(101) $ (17,036)
Compass 3 Contracts ................ (517) (16,902) (14) (16,916)
Compass 3 Level 2 Contracts ........ (460) (7,014) (19) (7,033)
---------- ----- ---------
$ (40,851) $(134) $ (40,985)
========== ===== =========
</TABLE>
40
<PAGE>
Notes to Financial Statements (Unaudited) -- continued
The changes in net assets from changes in numbers of outstanding units were as
follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1999 (000 Omitted)
-------------------------------------------------------------------
Transfers Between Withdrawals,
Variable Accounts Surrenders,
Purchase and Fixed Annuitizations,
Payments Accumulation and Contract
Received Account Charges
----------------- ----------------------- -------------------------
Units Dollars Units Dollars Units Dollars
------- --------- --------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Capital Appreciation Variable Account
Compass 2 Contracts ................ 78 $ 4,937 (245) $ (17,308) (877) $ (64,867)
Compass 3 Contracts ................ 253 12,002 (667) (32,192) (214) (10,493)
Compass 3 Level 2 Contracts ........ 134 2,496 1,286 26,221 (843) (17,094)
------- --------- ---------
$19,435 $ (23,279) $ (92,454)
======= ========= =========
Global Government Variable Account
Compass 2 Contracts ................ 4 $ 77 (39) $ (776) (49) $ (970)
Compass 3 Contracts ................ 30 551 (103) (2,012) (31) (599)
Compass 3 Level 2 Contracts ........ 23 230 48 612 (125) (1,417)
------- --------- ---------
$ 858 $ (2,176) $ (2,986)
======= ========= =========
Government Securities Variable Account
Compass 2 Contracts ................ 55 $ 1,402 120 $ 3,387 (698) $ (20,119)
Compass 3 Contracts ................ 77 1,532 (144) (2,931) (83) (1,674)
Compass 3 Level 2 Contracts ........ 32 326 449 5,349 (372) (4,392)
------- --------- ---------
$ 3,260 $ 5,805 $ (26,185)
======= ========= =========
High Yield Variable Account
Compass 2 Contracts ................ 36 $ 1,035 (119) $ (4,028) (519) $ (17,173)
Compass 3 Contracts ................ 56 1,349 (223) (5,694) (71) (1,743)
Compass 3 Level 2 Contracts ........ 22 248 255 1,826 (247) (3,214)
------- --------- ---------
$ 2,632 $ (7,896) $ (22,130)
======= ========= =========
Managed Sectors Variable Account
Compass 2 Contracts ................ 13 $ 656 142 $ 9,078 (150) $ (9,137)
Compass 3 Contracts ................ 104 5,884 (219) (12,153) (88) (5,189)
Compass 3 Level 2 Contracts ........ 67 1,194 910 17,015 (404) (7,694)
------- --------- ---------
$ 7,734 $ 13,940 $ (22,020)
======= ========= =========
Money Market Variable Account
Compass 2 Contracts ................ 57 $ 963 492 $ 9,356 (923) $ (17,240)
Compass 3 Contracts ................ 140 2,101 (386) (5,854) (261) (3,996)
Compass 3 Level 2 Contracts ........ 55 611 1,397 16,240 (718) (8,218)
------- --------- ---------
$ 3,675 $ 19,742 $ (29,454)
======= ========= =========
Total Return Variable Account
Compass 2 Contracts ................ 42 $ 1,269 (50) $ (1,492) (562) $ (18,922)
Compass 3 Contracts ................ 278 9,002 (822) (27,062) (274) (9,067)
Compass 3 Level 2 Contracts ........ 161 2,311 1,286 20,743 (1,420) (22,592)
------- --------- ---------
$12,582 $ (7,811) $ (50,581)
======= ========= =========
<CAPTION>
Year Ended December 31, 1999 (000 Omitted)
-------------------------------------------------------
Net Net
Accumulation Annuitization Net
Activity Activity Decrease
------------------------- --------------- -------------
Units Dollars Dollars Dollars
----------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
Capital Appreciation Variable Account
Compass 2 Contracts ................ (1,044) $ (77,238) $(613) $ (77,851)
Compass 3 Contracts ................ (628) (30,683) (190) (30,873)
Compass 3 Level 2 Contracts ........ 577 11,623 80 11,703
--------- ----- ---------
$ (96,298) $(723) $ (97,021)
========= ===== =========
Global Government Variable Account
Compass 2 Contracts ................ (84) $ (1,669) $ (6) $ (1,675)
Compass 3 Contracts ................ (104) (2,060) 92 (1,968)
Compass 3 Level 2 Contracts ........ (54) (575) (117) (692)
--------- ----- ---------
$ (4,304) $ (31) $ (4,335)
========= ===== =========
Government Securities Variable Account
Compass 2 Contracts ................ (523) $ (15,330) $(207) $ (15,537)
Compass 3 Contracts ................ (150) (3,073) 29 (3,044)
Compass 3 Level 2 Contracts ........ 109 1,283 3 1,286
--------- ----- ---------
$ (17,120) $(175) $ (17,295)
========= ===== =========
High Yield Variable Account
Compass 2 Contracts ................ (602) $ (20,166) $(266) $ (20,432)
Compass 3 Contracts ................ (238) (6,088) (4) (6,092)
Compass 3 Level 2 Contracts ........ 30 (1,140) (1) (1,141)
--------- ----- ---------
$ (27,394) $(271) $ (27,665)
========= ===== =========
Managed Sectors Variable Account
Compass 2 Contracts ................ 5 $ 597 $ (65) $ 532
Compass 3 Contracts ................ (203) (11,458) (126) (11,584)
Compass 3 Level 2 Contracts ........ 573 10,515 22 10,537
--------- ----- ---------
$ (346) $(169) $ (515)
========= ===== =========
Money Market Variable Account
Compass 2 Contracts ................ (374) $ (6,921) $ 163 $ (6,758)
Compass 3 Contracts ................ (507) (7,749) 69 (7,680)
Compass 3 Level 2 Contracts ........ 734 8,633 112 8,745
--------- ----- ---------
$ (6,037) $ 344 $ (5,693)
========= ===== =========
Total Return Variable Account
Compass 2 Contracts ................ (570) $ (19,145) $(164) $ (19,309)
Compass 3 Contracts ................ (818) (27,127) (177) (27,304)
Compass 3 Level 2 Contracts ........ 27 462 125 587
--------- ----- ---------
$ (45,810) $(216) $ (46,026)
========= ===== =========
</TABLE>
41
<PAGE>
Notes to Financial Statements (Unaudited) -- continued
(10) Detailed Statements of Operations -- Six Months Ended June 30, 2000
(000 Omitted)
<TABLE>
<CAPTION>
Capital Appreciation Variable Account
-------------------------------------------------------------
Compass 2 Compass 3
------------------------------ ------------------------------
Accumulation Annuitization Accumulation Annuitization
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Investment income:
Interest ............................. $ 271 $ 4 $ 48 $ --
Dividends ............................ 3,186 52 548 2
----------- --------- ---------- ------
Total investment income ............. $ 3,457 $ 56 $ 596 $ 2
Expenses .............................. 6,001 37 1,122 1
----------- --------- ---------- ------
Net investment income (loss) ......... $ (2,544) $ 19 $ (526) $ 1
----------- --------- ---------- ------
Realized and unrealized gain (loss)
on investments:
Net realized gain .................... $ 136,492 $ 2,234 $ 24,705 $ 84
Net unrealized loss .................. (102,465) (1,626) (18,423) (63)
----------- --------- ---------- ------
Net realized and unrealized gain
on investments ....................... $ 34,027 $ 608 $ 6,282 $ 21
----------- --------- ---------- ------
Increase in net assets from
operations ........................... $ 31,483 $ 627 $ 5,756 $ 22
=========== ========= ========== ======
<CAPTION>
Capital Appreciation Variable Account
--------------------------------------------
Compass 3 - Level 2
------------------------------
Accumulation Annuitization Total
-------------- --------------- -------------
<S> <C> <C> <C>
Investment income:
Interest ............................. $ 69 $ -- $ 392
Dividends ............................ 848 3 4,639
---------- ------- -----------
Total investment income ............. $ 917 $ 3 $ 5,031
Expenses .............................. 1,511 2 8,674
---------- ------- -----------
Net investment income (loss) ......... $ (594) $ 1 $ (3,643)
---------- ------- -----------
Realized and unrealized gain (loss)
on investments:
Net realized gain .................... $ 34,622 $ 153 $ 198,290
Net unrealized loss .................. (26,509) (112) (149,198)
---------- ------- -----------
Net realized and unrealized gain
on investments ....................... $ 8,113 $ 41 $ 49,092
---------- ------- -----------
Increase in net assets from
operations ........................... $ 7,519 $ 42 $ 45,449
========== ======= ===========
</TABLE>
<TABLE>
<CAPTION>
Global Government Variable Account
-------------------------------------------------------------
Compass 2 Compass 3
------------------------------ ------------------------------
Accumulation Annuitization Accumulation Annuitization
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Investment income:
Interest .............................. $ 104 $ 2 $ 86 $ 1
------ ---- ------ ----
Total investment income .............. $ 104 $ 2 $ 86 $ 1
Expenses ............................... 43 -- 37 --
------ ---- ------ ----
Net investment income ................. $ 61 $ 2 $ 49 $ 1
------ ---- ------ ----
Realized and unrealized gain (loss)
on investments:
Net realized loss ..................... $ (246) $ (4) $ (196) $ (2)
Net unrealized gain ................... 114 3 81 1
------ ---- ------ ----
Net realized and unrealized gain (loss)
on investments ........................ $ (132) $ (1) $ (115) $ (1)
------ ---- ------ ----
Increase (decrease) in net assets
from operations ....................... $ (71) $ 1 $ (66) $ --
====== ==== ====== ====
<CAPTION>
Global Government Variable Account
-----------------------------------------
Compass 3 - Level 2
------------------------------
Accumulation Annuitization Total
-------------- --------------- ----------
<S> <C> <C> <C>
Investment income:
Interest .............................. $ 204 $ 1 $ 398
------ ---- ------
Total investment income .............. $ 204 $ 1 $ 398
Expenses ............................... 83 -- 163
------ ---- ------
Net investment income ................. $ 121 $ 1 $ 235
------ ---- ------
Realized and unrealized gain (loss)
on investments:
Net realized loss ..................... $ (495) $ (1) $ (944)
Net unrealized gain ................... 251 6 456
------ ---- ------
Net realized and unrealized gain (loss)
on investments ........................ $ (244) $ 5 $ (488)
------ ---- ------
Increase (decrease) in net assets
from operations ....................... $ (123) $ 6 $ (253)
====== ==== ======
</TABLE>
42
<PAGE>
Notes to Financial Statements (Unaudited) -- continued
(10) Detailed Statements of Operations -- continued
<TABLE>
<CAPTION>
Government Securities Variable Account
-------------------------------------------------------------
Compass 2 Compass 3
------------------------------ ------------------------------
Accumulation Annuitization Accumulation Annuitization
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Investment income:
Interest .......................... $4,173 $ 95 $ 444 $ 5
------ ----- ----- ---
Total investment income .......... $4,173 $ 95 $ 444 $ 5
Expenses ........................... 1,101 8 123 --
------ ----- ----- ---
Net investment income .............. $3,072 $ 87 $ 321 $ 5
------ ----- ----- ---
Realized and unrealized gain (loss)
on investments:
Net realized loss .................. $ (515) $ (12) $ (54) $--
Net unrealized gain ................ 1,330 30 135 2
------ ----- ----- ---
Net realized and unrealized gain
on investments .................... $ 815 $ 18 $ 81 $ 2
------ ----- ----- ---
Increase in net assets
from operations ................... $3,887 $ 105 $ 402 $ 7
====== ===== ===== ===
<CAPTION>
Government Securities Variable Account
----------------------------------------
Compass 3 - Level 2
------------------------------
Accumulation Annuitization Total
-------------- --------------- ---------
<S> <C> <C> <C>
Investment income:
Interest .......................... $ 693 $ 2 $5,412
----- --- ------
Total investment income .......... $ 693 $ 2 $5,412
Expenses ........................... 178 -- 1,410
----- --- ------
Net investment income .............. $ 515 $ 2 $4,002
----- --- ------
Realized and unrealized gain (loss)
on investments:
Net realized loss .................. $ (85) $-- $ (666)
Net unrealized gain ................ 232 1 1,730
----- --- ------
Net realized and unrealized gain
on investments .................... $ 147 $ 1 $1,064
----- --- ------
Increase in net assets
from operations ................... $ 662 $ 3 $5,066
===== === ======
</TABLE>
<TABLE>
<CAPTION>
High Yield Variable Account
-------------------------------------------------------------
Compass 2 Compass 3
------------------------------ ------------------------------
Accumulation Annuitization Accumulation Annuitization
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Investment income:
Interest ................................ $ 5,315 $ 128 $ 504 $--
Dividends ............................... 52 1 5 --
-------- ------ ------ ---
Total investment income ................ $ 5,367 $ 129 $ 509 $--
Expenses ................................. 1,070 10 106 --
-------- ------ ------ ---
Net investment income ................... $ 4,297 $ 119 $ 403 $--
-------- ------ ------ ---
Realized and unrealized gain (loss) on
investments:
Net realized loss ....................... $ (260) $ (7) $ (24) $--
Net unrealized gain (loss) .............. (4,078) (99) (352) (7)
-------- ------ ------ ---
Net realized and unrealized gain (loss)
on investments .......................... $ (4,338) $ (106) $ (376) $(7)
-------- ------ ------ ---
Increase (decrease) in net assets from
operations .............................. $ (41) $ 13 $ 27 $(7)
======== ====== ====== ===
<CAPTION>
High Yield Variable Account
------------------------------------------
Compass 3 - Level 2
------------------------------
Accumulation Annuitization Total
-------------- --------------- -----------
<S> <C> <C> <C>
Investment income:
Interest ................................ $ 898 $-- $ 6,845
Dividends ............................... 8 -- 66
------ --- --------
Total investment income ................ $ 906 $-- $ 6,911
Expenses ................................. 177 -- 1,363
------ --- --------
Net investment income ................... $ 729 $-- $ 5,548
------ --- --------
Realized and unrealized gain (loss) on
investments:
Net realized loss ....................... $ (47) $-- $ (338)
Net unrealized gain (loss) .............. (580) 9 (5,107)
------ --- --------
Net realized and unrealized gain (loss)
on investments .......................... $ (627) $ 9 $ (5,445)
------ --- --------
Increase (decrease) in net assets from
operations .............................. $ 102 $ 9 $ 103
====== === ========
</TABLE>
<TABLE>
<CAPTION>
Managed Sectors Variable Account
-------------------------------------------------------------
Compass 2 Compass 3
------------------------------ ------------------------------
Accumulation Annuitization Accumulation Annuitization
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Investment income:
Interest ............................. $ 164 $ 1 $ 159 $--
Dividends ............................ 78 1 73 --
--------- ------ --------- ---
Total investment income ............. $ 242 $ 2 $ 232 $--
Expenses .............................. 698 2 742 --
--------- ------ --------- ---
Net investment income ................ $ (456) $ -- $ (510) $--
--------- ------ --------- ---
Realized and unrealized gain (loss) on
investments:
Net realized gain .................... $ 15,055 $ 109 $ 15,703 $ 7
Net unrealized loss .................. (20,526) (148) (19,850) (9)
--------- ------ --------- ---
Net realized and unrealized loss on
investments .......................... $ (5,471) $ (39) $ (4,147) $(2)
--------- ------ --------- ---
Decrease in net assets from
operations ........................... $ (5,927) $ (39) $ (4,657) $(2)
========= ====== ========= ===
<CAPTION>
Managed Sectors Variable Account
-------------------------------------------
Compass 3 - Level 2
------------------------------
Accumulation Annuitization Total
-------------- --------------- ------------
<S> <C> <C> <C>
Investment income:
Interest ............................. $ 240 $ 1 $ 565
Dividends ............................ 113 -- 265
--------- ------ ---------
Total investment income ............. $ 353 $ 1 $ 830
Expenses .............................. 1,021 1 2,464
--------- ------ ---------
Net investment income ................ $ (668) $ -- $ (1,634)
--------- -------- ---------
Realized and unrealized gain (loss) on
investments:
Net realized gain .................... $ 21,471 $ 79 $ 52,424
Net unrealized loss .................. (29,336) (104) (69,973)
--------- ------ ---------
Net realized and unrealized loss on
investments .......................... $ (7,865) $ (25) $ (17,549)
--------- ------ ---------
Decrease in net assets from
operations ........................... $ (8,533) $ (25) $ (19,183)
========= ====== =========
</TABLE>
43
<PAGE>
Notes to Financial Statements (Unaudited) -- continued
(10) Detailed Statements of Operations -- continued
<TABLE>
<CAPTION>
Money Market Variable Account
-------------------------------------------------------------
Compass 2 Compass 3
------------------------------ ------------------------------
Accumulation Annuitization Accumulation Annuitization
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Investment income:
Interest ................................ $2,144 $36 $317 $ (8)
------ --- ---- ----
Total investment income (loss) ......... $2,144 $36 $317 $ (8)
Expenses ................................. 671 4 101 --
------ --- ---- ----
Net investment income (loss) ............. $1,473 $32 $216 $ (8)
------ --- ---- ----
Increase (decrease) in net assets from
operations .............................. $1,473 $32 $216 $ (8)
====== === ==== ====
<CAPTION>
Money Market Variable Account
----------------------------------------
Compass 3 - Level 2
------------------------------
Accumulation Annuitization Total
-------------- --------------- ---------
<S> <C> <C> <C>
Investment income:
Interest ................................ $1,231 $ 5 $3,725
------ --- ------
Total investment income (loss) ......... $1,231 $ 5 $3,725
Expenses ................................. 377 -- 1,153
------ --- ------
Net investment income (loss) ............. $ 854 $ 5 $2,572
------ --- ------
Increase (decrease) in net assets from
operations .............................. $ 854 $ 5 $2,572
====== === ======
</TABLE>
<TABLE>
<CAPTION>
Total Return Variable Account
-------------------------------------------------------------
Compass 2 Compass 3
------------------------------ ------------------------------
Accumulation Annuitization Accumulation Annuitization
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Investment income:
Interest .............................. $ 1,271 $ 28 $ 864 $ 3
Dividends ............................. 565 13 385 1
--------- ------ ------ ----
Total investment income .............. $ 1,836 $ 41 $1,249 $ 4
Expenses ............................... 900 8 657 1
--------- ------ ------ ----
Net Investment Income .................. $ 936 $ 33 $ 592 $ 3
--------- ------ ------ ----
Realized and unrealized gain (loss) on
investments:
Net realized gain ...................... $ 1,594 $ 35 $1,092 $ 4
Net unrealized loss .................... (1,199) (16) (863) (2)
--------- ------ ------ ----
Net realized and unrealized gain on
investments ........................... $ 395 $ 19 $ 229 $ 2
--------- ------ ------ ----
Increase in net assets from operations.. $ 1,331 $ 52 $ 821 $ 5
========= ====== ====== ====
<CAPTION>
Total Return Variable Account
------------------------------------------
Compass 3 - Level 2
------------------------------
Accumulation Annuitization Total
-------------- --------------- -----------
<S> <C> <C> <C>
Investment income:
Interest .............................. $ 1,472 $ 4 $ 3,642
Dividends ............................. 654 2 1,620
--------- ---- ---------
Total investment income .............. $ 2,126 $ 6 $ 5,262
Expenses ............................... 1,043 1 2,610
--------- ---- ---------
Net Investment Income .................. $ 1,083 $ 5 $ 2,652
--------- ---- ---------
Realized and unrealized gain (loss) on
investments:
Net realized gain ...................... $ 1,808 $ 5 $ 4,538
Net unrealized loss .................... (1,121) (3) (3,204)
--------- ---- ---------
Net realized and unrealized gain on
investments ........................... $ 687 $ 2 $ 1,334
--------- ---- ---------
Increase in net assets from operations.. $ 1,770 $ 7 $ 3,986
========= ==== =========
</TABLE>
(11) Line of Credit
The accounts and other affiliated funds participate in a $1.1 billion unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made to temporarily finance the repurchase of
account shares. Interest is charged to each account, based on its borrowings,
at a rate equal to the bank's base rate. In addition, a commitment fee based on
the average daily unused portion of the line of credit, is allocated among the
participating funds at the end of each quarter. The commitment fee allocated to
each of the accounts for the six months ended June 30, 2000, ranged from $36 to
$3,009.
This Compass semiannual report is prepared for the general information of
contract owners. It is authorized for distribution to prospective investors
only when preceded or accompanied by a prospectus.
44
<PAGE>
Members of Boards of Managers
and Officers
SAMUEL ADAMS+, Member
Counsel, Kirkpatrick & Lockhart LLP
Boston, Massachusetts
J. KERMIT BIRCHFIELD+, Member
Consultant; Chairman, Display Technology, Inc.; Managing Director,
Century Partners, Inc., Gloucester, Massachusetts
JAMES R. BORDEWICK JR.*, Assistant Secretary
STEPHEN E. CAVAN*, Secretary and Clerk
WILLIAM R. GUTOW+, Member
Private investor and real estate consultant; Vice Chairman,
Capitol Entertainment Management Company, Dallas, Texas
DAVID D. HORN, Member
Former Senior Vice President and General Manager,
Sun Life Assurance Company of Canada,
New Vineyard, Maine
GARTH MARSTON, Member Emeritus
Former Chairman, The Provident Institution for Savings,
Boston, Massachusetts
DERWYN F. PHILLIPS+, Member
Former Vice Chairman, The Gillette Company,
Marblehead, Massachusetts
C. JAMES PRIEUR#, President
Sun Life Assurance Company
of Canada (U.S.)
Annuity Service Mailing Address
c/o Sun Life Retirement Products and Services
P.O. Box 1024, Boston, MA 02103-9986
Investment Adviser
Massachusetts Financial Services Company
500 Boylston Street, Boston, MA 02116-3741
Distributor
Clarendon Insurance Agency, Inc.
One Sun Life Executive Park, Wellesley Hills, MA 02481
Custodian
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110-2875
Account Information
For account information, please call toll free:
1-800-752-7218 anytime from a touch-tone
telephone.
To speak with a customer service representative,
please call toll free: 1-800-752-7215 any
business day from 8 a.m. to 6 p.m. Eastern time.
+ Independent Member
* MFS Investment Management[RegTM]
# Sun Life Assurance Company of Canada
COUS-3 08/00 52.3M
